Commercial lines, also known as insurance lines, is a term used when it comes to covering risks related to business activity. Mostly it is about helping an individual to be able to cover financial losses that they were not prepared for and probably never would be prepared, because this financial coverage is usually oriented in big amount of money for emergency situations. It is in opposition to personal lines insurance, which covers only personal risk of an individual. As an example there can be pointed a few most common types of commercial lines and it can be risk with workers compensation, general liability (CGL) and property insurance in commercials in general (Borch, Sandmo and Aase, 2014).
Most common types of commercial insurance
Most common types of commercial lines by Zweifeland and Eisen (2012):
- When it comes to workers compensation insurance it's job is to protect
employees by covering injuries on-the-job.
- Commercial general liability needs to cover a person from most common
hazards that can happen to the third party.
- Last but not least most common is the property insurance that covers any damages or losses that happens to personal business property (Zweifeland and Eisen, 2012).
Commercial lines vs. personal lines
First difference that should be pointed out is that commercial lines take in concern broader areas than personal lines. Personal lines usually deal with premises exposures, whereas commercial lines do cover liabilities exposures such as: operations, premises, completed operations, and products (Dionne, 2013) .
Commercial lines insurance - how it works
Commercial insurance is based on a contract between the business company and insurance company. The contract is finalized when both sides keep theirs commitments. The insurance company commits to paying for financial losses of the business company right after business company will file a claim about the loss and keeps previously established financial limit. Of course, the contract is valid only if business was paying the deductible amount of money (Panjer et al., 1998).
- Borch, K. H., Sandmo, A., & Aase, K. K. (2014). Economics of insurance, Elsevier (Vol. 29).
- Dionne, G. (Ed.). (2013). Contributions to insurance economics, Springer Science & Business Media (Vol. 13).
- Ericson, R. V., & Doyle, A. (2004). Uncertain business: Risk, insurance and the limits of knowledge, University of Toronto Press.
- Panjer, H. H., Dufresne, D., Gerber, H. U., Mueller, H., Pedersen, H., Pliska, S., ... & Tan, K. S. (1998). Financial Economics: With Applications to Investments, Insurance, and Pensions, P. P. Boyle, & S. H. Cox (Eds.). Schaumburg, Ill.: Actuarial Foundation.
- Rule, C. (2003). Online dispute resolution for business: B2B, ecommerce, consumer, employment, insurance, and other commercial conflicts, John Wiley & Sons.
- Zweifel, P., & Eisen, R. (2012). Insurance economics, Springer Science & Business Media.
Author: Mateusz Fudala