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Business insurance

Business insurance is an insurance that enables businesses to transfer the risk of a loss to an insurance company. By paying a premium to the insurance company, the business can protect itself against the possibility of sustaining a much larger financial loss. The types of cover generally offered under businesses insurance and which FOS may be able to consider a dispute about include:

  • Fire
  • Theft
  • Lightning
  • Explosion
  • Earthquake
  • Escape of liquids
  • Impact
  • Storm or rain water
  • Automobile accidents for business insured vehicles

Often, the life savings of the small business owner are tied up in the company, so the owner must take steps to protect his or her family from the financial consequences of events that could disrupt operations, reduce profits, or even cause the business to go bankrupt. It places the economic burden of risk elsewhere so the business owner can focus their attention on running the business. In addition, the premiums paid for many types of insurance are considered a tax deductible business expenses.

Common types of losses and insurance

Small business owners need to identify their company's main areas of exposure to risk and obtain an insurance that is suitable to their business. The business owner can evaluate the probability of each risk and determine the potential severity of the loss associated with it. According to the Small Business Administration, the most common types of risks encountered by small businesses involve:

  • property losses
  • legal liability for property, products, or services*
  • injury, illness, disability, or death of key employees*; and
  • the interruption of business operations and income due to the occurrence of these other losses.

*Please note that FOS cannot consider disputes concerning legal liability for property, products, or services; or the injury, illness, disability, or death of key employees.

Example determinations
  • 203219 Small business – extent of cover
  • 207307 Small business – water damage
  • 210923 Farm cover – storm damage
  • 202941 Commercial vehicle – adequacy of claim settlement
  • 206194 Fleet policy – applicant being clearly informed