What is a commercial insurance

Commercial lines insurance includes property and casualty insurance products for businesses. Commercial lines Insurance helps keep the economy running smoothly by protecting businesses from potential losses they couldn’t afford to cover on their own, which allows businesses to operate when it might otherwise be too risky to do so.

Commercial policies may be contrasted with personal lines insurance.

• Property casualty insurance can be broken down into two major categories: commercial lines and personal lines.
• Commercial lines account for about half of the U.S. property casualty insurance industry and include the many kinds of insurance products designed for businesses.
• Risks and hazards covered under commercial lines include, for example, malpractice insurance, professional liability, builder's risk, crop insurance, and many other industry-specific coverages.

Commercial lines insurance include products, such as commercial auto insurance, workers compensation insurance, federal flood insurance, aircraft insurance, ocean marine insurance, and medical malpractice insurance. Commercial lines protect businesses against potentially devastating financial losses caused by accidents, lawsuits, natural disasters, and other adverse events. Available coverages and premium costs vary by business type, size, and location. In 2019, the five largest issuers of commercial lines, as measured by the amount of premiums written, according to the National Association of Insurance Commissioners, were State Farm GRP, Berkshire Hathaway GRP, Progressive GRP, Liberty Mutual GRP, and Allstate Insurance GRP.

While all commercial lines share some similarities, each policy will be tailored for the type of business being covered and the client’s unique needs. Suppose a structural engineering firm needs professional liability insurance. An insurance policy could protect the company against claims of negligence in creating a building’s plans, performing inspections, and supervising construction, as well as against claims of failure to render professional services. The firm could purchase general coverage as well as specific, additional coverage for each project, plus coverage for punitive damages.

Commercial lines aren’t just for large corporations. Even a small, home-based business might need one or more commercial lines because homeowners insurance provides limited or no insurance for business activities. For example, a home business might need commercial auto insurance for a company-owned delivery vehicle, workers compensation insurance for the employee who drives the vehicle, property insurance to cover business goods stolen from the home or vehicle and liability insurance to protect against claims by any client who claims the business’s product harmed them.

There are several different types of commercial lines insurance, with many policy types tailored to a specific industry or industry-specific hazard. Here are just a few examples:

• Debris Removal Insurance: this insurance covers the cost of removing debris after a catastrophic event, such as a fire burning a building down. Before rebuilding, the remains of the old building must be removed. Property insurance alone typically won't cover the costs of removing the debris.
• Builder's Risk Insurance: this coverage insures buildings while they are being constructed.
• Glass Insurance: glass insurance covers broken windows in a commercial establishment.
• Inland Marine Insurance: this covers property in transit and other people's property on your premises. For example, this insurance would cover fire-damage to customers' clothing from a fire at a dry cleaning business.
• Business Interruption Insurance: this insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period.
• Demolition Insurance: used to cover the costs of demolishing a building that is damaged by a peril, such as a fire or storm. Zoning requirements or building codes may require that a damaged building be demolished rather than repaired. Demolition insurance covers the cost of tearing down undamaged portions of a damaged structure.
• Crop-Hail Insurance: a type of insurance that provides coverage for damage and destruction by hail and fire. Purchased by farmers, it is designed to protect agricultural products while they are still in the field and have yet to be harvested. Crop-hail insurance protects the livelihood of farmers, who are often at the mercy of sudden weather events.

Commercial health insurance is health insurance provided and administered by nongovernmental entities. It can cover medical expenses and disability income for the insured.

As of 2020, 1,096 health insurers filed statements with the National Association of Insurance Commissioners (NAIC), a nonprofit that sets standards for the U.S. insurance industry and provides support to insurance regulators.

• Nongovernmental agencies provide and administer what is called commercial health insurance.
• Two of the most popular types of commercial health insurance plans are the preferred provider organization (PPO) and health maintenance organization (HMO).
• Most commercial insurance is provided as group-sponsored insurance, offered by an employer.
• Although not administered by the government, plan offerings, to a large degree, are regulated and overseen by each state.

Commercial health insurance policies are primarily sold by for-profit public and private carriers. Generally, licensed agents and brokers sell plans to the public or group members; however, customers can also purchase directly from the carrier in many instances. These policies vary widely in the amount and types of specific coverage that they provide.

The term "commercial" distinguishes these types of policies from insurance that's provided by a public or government program, such as Medicaid, Medicare, or the State Children's Health Insurance Program (SCHIP). In broad terms, any type of health insurance coverage that isn’t provided or maintained by a government-run program can be considered a type of commercial insurance.

Most commercial health insurance plans are structured as either a preferred provider organization (PPO) or health maintenance organization (HMO). The main difference between these two types of plans is that an HMO requires patients to use providers and facilities within the network if they want insurance to cover the costs, while a PPO lets patients go outside the network (though their out-of-pocket costs might be greater).

Also, HMOs require patients to choose one primary care physician, who serves as the central provider and coordinates the care that other specialists and healthcare practitioners provide. Referrals from the primary are often necessary to see a specialist.

The net earnings of the U.S. health insurance industry in 2020, according to the National Association of Insurance Commissioners (NAIC). Profit margins increased 3.8% over 2019.

Commercial health insurance can be categorized according to its renewal provisions and the type of medical benefits provided. Commercial policies can be sold individually or as part of a group plan and are offered by public or private companies. Some insurance programs are operated as nonprofit entities, often as an affiliated or regional operation of a larger, for-profit enterprise.

Health insurance in the commercial market is commonly obtained through an employer. Because employers typically cover at least a portion of the premiums, this is often a cost-effective way for employees to obtain health coverage. Employers are often able to get attractive rates and terms because they negotiate contracts with insurers and can offer them a large number of policy customers.

Health insurance provided and/or administered by the government is mainly funded through taxes. It is often reserved for particular groups, such as seniors (Medicare), low-income patients (Medicaid), and ex-military personnel (Veterans Health Administration programs). Other examples of government-sponsored insurance include the Indian Health Service (IHS), the State Children’s Health Insurance Program (SCHIP), and TRICARE.

Self-employed people and small business owners can buy health insurance coverage, but it is often financially beneficial for them to try and join via a group plan through a professional organization or local group.

The specific details of a commercial insurance plan can vary widely and are determined by the company that offers the plan. State regulatory and legislative bodies also dictate certain aspects of what the plans are required to offer and how they must operate. These laws also establish mandates for how and when insurers must pay invoices and reimburse providers and patients, as well as the amount of funds the insurer must keep in reserve to have sufficient capital to pay out benefits.

Technically, there is no difference: Commercial health insurance is provided by private issuers—as opposed to government-sponsored health insurance, which is provided by federal agencies. Commercial insurance may be sponsored by an employer or privately purchased by an individual. Most private insurance providers are for-profit companies, but they can be nonprofit organizations too.

Obamacare (a nickname for the Affordable Care Act) is a federal law that is often used to refer to individual health insurance obtained through state health exchanges or marketplaces. These plans are offered by private companies, so technically they are commercial insurance—though they do have to follow some federally mandated guidelines.

Common types of commercial health insurance include HMOs, PPOs, POS (point-of-service) plans, HRAs (health reimbursement accounts), and LTC (long-term care) plans. Medicare Advantage, Medigap, and other Medicare supplemental plans count as commercial health insurance too. The term can also broaden from general health insurance to include dental plans and vision plans.