Originally published July 14, 2020. Last updated July 30, 2024.

Have a question about your insurance? You’re not alone. Choosing the right insurance for your business is one of the most important decisions you’ll make for it. Business coverage options are generally more complex than many non-business coverages, which can add to the confusion if you’re new to a particular line of business or don’t deal with insurance questions that regularly.

When it comes to your insurance, there really is no such thing as a “dumb” question. That’s because having the information you need to make the right decision for your business is always better than not having it.

As one of the top insurance program administrators in the country, we’re used to questions! Here are 10 of our most common business insurance FAQs from customers just like you.

FAQs Regarding Business Insurance Policies

Many business owners have questions about their policy options. Here are five of the most common ones we hear:

1. What Exactly Is Business Insurance?

Business insurance is a type of commercial coverage designed to protect your company’s assets from losses that may occur in the course of normal business operations. Types of business coverage can vary, with options that can protect your business against property damage, bodily injury, legal liability and employee-related risks being the most common.

2. What Qualifies as a Claim?

In insurance, a claim is a formal request by the policyholder, their agent or their beneficiary for coverage or compensation for a covered loss or other policy event. Claims can also involve an allegation brought against your business by an employee, customer or other third party. Third-party claims can be particularly costly and stressful to defend against.

What is and is not a claim isn’t always clear. Some incidents may initially appear likely to result in a claim, but never do. In other cases, seemingly minor incidents can develop into very expensive claims. When you have a business, the best course of action is to work with your insurer, reporting any incident you believe could develop into a claim as soon as possible. This better positions you and your insurer to defend against any potential claim while minimizing potential claim costs.

3. What’s the Difference Between Claims-Made and Occurrence Policies?

Insurance policies can come with many options. One of the most important options to note on your policy of choice is the time period for which your business can be covered for claims. Here, policy options fall into two broad categories, claims-made and occurrence policies.

Claims-made policies cover you for claims that are made while your policy is active. Most policies specify an active period of one year, which may be renewable annually. Occurrence policies are designed to protect you from covered incidents that are reported after your initial policy period has lapsed or expired, for an additional cost. A tail coverage endorsement can also be added to a claims-made policy to provide added protection by extending the reporting period for claims.

4. What Is an Insurance Endorsement?

An insurance endorsement or rider is any kind of change to the original terms of your policy. Insurance endorsements are very common. It’s an easy way for an insurance company to customize a policy to suit a particular business’s unique risks. Endorsements may add specific coverages or increase limits of coverage, or they may exclude or restrict certain types of coverage. Tail coverage is an example of an endorsement, extending the effective dates of coverage for certain losses under a policy beyond its original expiration date.

5. What’s the Difference Between General Liability and Property Insurance?

General liability insurance and property insurance are two of the most common coverages purchased by businesses. The type of coverage offered by each is unique, but complimentary. Many insurance programs now bundle together coverages for both general liability and property risks into one convenient policy package.

General liability is designed to protect your business from third-party claims by customers and others alleging damages for incidents such as bodily injury, personal injury or damage to their property. Property insurance, on the other hand, is designed to protect against key risks to your own business’s property, such as fire, theft or weather damage.

FAQs Regarding Insurance Providers

Business owners also frequently have questions about the companies who offer, manage and service their business insurance. Here are five common questions we hear:

1. What’s the Difference Between an Insurance Broker and a Program Administrator?

Most business owners are familiar with the role of an insurance broker, but less familiar with that of a program administrator. The typical insurance broker works with clients to analyze and recommend suitable insurance options from one or more carriers.

By contrast, a program administrator (PA) often plays a bigger role in the insurance marketplace, being authorized by one or more carriers to quote, bind and issue polices on their behalf. A PA may also handle claims, something which is typically managed by the carrier itself. By working with a PA, you can benefit from their experience and industry relationships within a specific area of insurance that may make buying and servicing your insurance more convenient.

2. Is It Advisable to Work With One or Multiple Brokers?

As a business owner, doing your due diligence is important, and shopping around for the best quality and price is often beneficial. But working with multiple insurance brokers at once can cause problems.

Competition among brokers doesn’t always result in better outcome. Without knowledge of your business and its unique risks, an order-taker mentality can develop. Accuracy and completeness of submissions then falls, putting you at risk of being underinsured and exposing you to dangerous levels of risk. Another possible outcome in this situation is that your business ends up overinsured, paying for overlapping coverages you don’t need or unsuitable policies you can’t use.

Instead, an insurance broker’s role should be advisory. A good broker can do more than pick an off-the-shelf solution and fill out the application for you. Look for a broker who will use their expertise and established relationships with underwriters to help you find tailored, cost-effective coverage that is specific to your business’s unique needs.

3. What Is the Role of a Carrier?

An insurance carrier is the insurance company that ultimately provides the policy and handles the execution and support of the policy. Depending on how you purchased a policy, you may work with a carrier exclusively, for certain aspects of your policy or not at all.

If you purchase coverage from a carrier directly, that carrier may be your only point of contact. With a large carrier, this setup can feel a bit impersonal, so many clients prefer working with a broker or program administrator. If you purchase your insurance from a broker, there may be several points of contact for your policy, from the broker to the carrier. With a program administrator, you may have a single point of contact for all your policy needs and may be able to access more personalized services.

4. Why Is Choosing a Dependable Carrier Important?

No matter whether you work directly with a carrier, a broker or a program administrator, carriers are the firms on which you must rely to pay for any claims you experience. If for some reason a carrier is not able to pay for a valid claim, your business must shoulder the financial cost of the claim itself.

It’s important you choose a carrier that is financially sound and well-respected to ensure your business has adequate defense against claims and protection in the event a settlement or judgment needs to be funded. Insurance with the wrong carrier could leave you underinsured or overexposed to risk.

5. What’s the Best Way to Choose a Dependable Carrier?

A dependable carrier will maintain an ongoing high rating from A.M. Best Company, the insurance industry’s global credit rating agency. A carrier’s length of history in the business and expertise in your area is also key for your decision.

Take time to do your due diligence and ask about the carrier for any potential policies for your business before purchasing or switching your coverage. Most brokers, program administrators and carriers will be happy to assist you and provide a carrier’s A.M. Best rating and business qualifications.

Still Have Questions? We’re Here to Help!

Business insurance can be complex, especially for franchise owners, and it’s important to get all your questions answered. To learn more about your business insurance options with us, contact Lockton Affinity. We will work with you to ensure you receive tailored coverage that meets the needs of your business.