The Most Frequent Claims for Small Businesses
Not many small business owners are aware of their risks when it comes to property and casualty insurance coverage. Once they become aware of the most common and costliest claims, they can focus their time, energy, and resources on areas that save the most money. A study determined the most common and costly claims filed by small businesses.
Industry experts analyzed claims from over a million property and liability policies spanning a few years. Most small business owners are surprised by the study’s findings. The research revealed that the most common claim, burglary and theft, makes up nearly 20% of all filed claims but typically costs around $8,000. Conversely, reputational harm is less common but carries the highest cost.
If you’re curious about the 10 most frequent small business insurance claims, check out the content below.
What Is a Business Insurance Claim?
If your business has insurance and suffers damage or loss, you will want to recover your money quickly. A business insurance claim is a legal notice you give to your insurance company to let them know about the incident and ask for compensation.
When your business insurance claim is received, your insurance company or a company working for them will look into it. If your policy covers the loss and your claim is approved, they will send a payment. The payment might go directly to you or another party affected by the loss. Acting fast will help you get the money you need to get your business running smoothly again.
Types of Insurance Claims
There are different types of insurance claims businesses might need to file to recover costs from accidents and disasters. Here are the top 10 insurance claims for small businesses:
1. Fire
Fire is a significant danger to small businesses and often leads to insurance claims in industries like manufacturing and restaurants. You can file commercial property insurance claims to cover financial losses from fire, such as repairing or rebuilding buildings and replacing damaged equipment and supplies. If you have business income insurance, you can file a claim to cover the money you lose while your business is closed due to fire damage.
2. Burglary and Theft
Burglary and theft are the most common insurance claims businesses file. These claims are especially common in the retail, construction, and manufacturing industries. They can include damage to your company property from a break-in and the actual theft of items and equipment. Commercial property insurance can help protect the costs related to burglary and theft.
3. Third Party Property Damage
Property damage liability claims involve physical injury to someone else's property, not the business. For example, if you spill coffee on a client's laptop during a meeting, you will likely need to cover the replacement cost. Property damage liability insurance protects your business against the risk of unintentional property damage to others. This could be a customer but not necessarily. General liability insurance helps you manage these expenses.
4. Third Party Bodily Injury
Your business can be liable if a customer slips and falls on your property, potentially leading to medical expenses and legal fees. General liability insurance usually covers these costs when you are negligent for the occurrence. While accidents are unpredictable, you can help prevent them by maintaining good housekeeping and proper maintenance.
5. Auto Accident
Auto accidents with commercial vehicles often lead to insurance claims for vehicle damage, property damage, or bodily injury. Businesses with commercial vehicles face accident risks, but a commercial auto insurance policy can protect the business, its vehicles, and employees from paying for the claim expenses. Learn about the commercial insurance policies small businesses need to protect themselves from financial loss.
6. Reputational Harm - Personal Injury Liability
In business, "no harm done" isn't always true. Reputational harm can occur due to an employee’s thoughtless comments about a competitor. The competitor may sue your business for damage to its reputation and loss of future income resulting. This damage can last for years and truly hurt another business. To avoid such claims, make sure you and your staff do not criticize competitors and focus on building a company culture based on ethics, fairness, quality, and safety.
7. Wind and Hail Damage
Heavy storms can cause trees and branches to fall on buildings, hail can damage windows and roofs, and hurricanes and tornadoes can destroy commercial buildings. Wind and hail damage claims are the third most common commercial insurance claims, especially in storm-prone areas. Your commercial property insurance can help cover the cost of damage from windstorms.
8. Product Liability
If your business makes or sells products, you could face product liability claims if a customer gets injured or experiences damage to their property from your product. For instance, if a defective part in your custom porch swing causes it to fall and a client is hurt, you might be liable for medical costs and legal fees. To avoid costly claims, consider preventive measures like quality control testing. As a last resort, purchasing general liability with product liability included.
9. Struck by an Object
Struck-by-an-object insurance claims occur when an employee is hit by equipment or another object at work. These accidents can be fatal or non-fatal and are common in construction, manufacturing, agriculture, and forestry. Workers' compensation protects lost wages and medical expenses, and in case of death, benefits go to the employee's family. Most states require businesses to have workers' compensation insurance.
10. Water and Freezing Damage
Water-related damages are the second most common type of insurance claim filed by companies, often due to burst pipes or storm flooding. These claims are common in coastal and low-lying areas prone to floods. Your commercial property insurance will cover damage to your building and contents from burst pipes, up to the policy limit. Many carriers are sub-limiting water damage property claims at $25,000 because of the frequency of these incidents. Note that your property coverage does not cover flood damage. A separate commercial flood policy should be considered, even if your business is not in a “flood zone”. Most flood claims occur outside of the 100-year flood zones.
Having the appropriate policies in place ensures your business is prepared for these incidents. If you're unsure, contact InsuranceAdvisor.com to get a quote or discuss your business insurance needs. Visit InsuranceAdvisor.com today to secure your business.
FAQs
1. What are the most common insurance claims for small businesses?
The most common insurance claims for small businesses include burglary and theft, water-related and fire property claims. Third-party liability claims from customer slip-and-fall accidents, and workers’ compensation employee slip and fall injuries.
2. How can I protect my business from burglary and theft?
Install security systems, have cameras installed, use strong locks, and use a central station monitoring service. As a last resort, purchase property insurance coverage to cover your business from burglary and theft. Contact InsuranceAdvisor.com to ensure you have the right policy.
3. What should I do if my business experiences water damage?
If your business experiences water damage, begin dry out and cleanup (or hire companies that specialize in these services) to prevent mold and mitigate your overall damage. Document the damage with plenty of photos and contact your insurance provider to submit the claim. Depending on the cause of the water leakage, your commercial property insurance may cover the costs.
4. How can I lower the risk of customer slip-and-fall accidents?
You can reduce the risk of customer slip-and-fall accidents by keeping floors clean and dry, choosing highly slip-resistant flooring, maintaining good lighting, and properly marking all flooring transitions for steps and ramps with reflective fluorescent tape and visuals. When all else fails, having general liability insurance to cover resulting claims will ease your mind.
5. What type of insurance do I need for employee injuries?
For employee injuries, you need workers' compensation insurance. This policy pays for all medical expenses, replacement services, and a percentage of lost wages if an employee gets hurt on the job and is unable to work or care for themselves. Visit InsuranceAdvisor.com to learn more about the available coverage options.