Insight

What’s NOT Covered: Common Commercial Insurance Exclusions to Watch For

Running a business comes with risks and having the right commercial insurance is essential for protecting your company from financial losses. However, not all policies cover every potential issue. Understanding common exclusions in commercial insurance policies can help you avoid costly surprises. Here’s a breakdown of key exclusions in Property Insurance, General Liability Insurance, Workers’ Compensation, Commercial Auto Insurance, Professional Liability Insurance and Bonding Insurance.

Property Insurance Exclusions

Commercial property insurance protects your business’s physical assets, but there are several exclusions to be aware of:

  • Flood & Earthquake Damage – Standard property insurance does not cover floods or earthquakes. Businesses in high-risk areas should consider purchasing separate flood or earthquake insurance.
  • Wear & Tear – Damage due to gradual deterioration, corrosion or routine maintenance issues is not covered.
  • Employee Theft – Losses caused by internal theft or fraud may not be covered unless you have a crime insurance policy.
  • Acts of War & Terrorism – Damage resulting from war, riots or terrorist attacks is typically excluded unless specifically added to your policy.

General Liability Insurance Exclusions

General liability insurance covers third-party claims related to injuries or property damage, but it has its limitations:

  • Professional Errors & Negligence – If your business provides professional services, mistakes made during the course of work are not covered under general liability. You’ll need professional liability insurance.
  • Employee Injuries – Workers’ Compensation, not general liability insurance, covers injuries sustained by employees on the job.
  • Intentional Acts – If a business owner or employee intentionally causes harm or damage, the insurance policy will not cover the incident.
  • Contractual Liabilities – Any liabilities assumed under a contract may be excluded unless specifically covered.

Workers’ Compensation Exclusions

Workers’ Compensation is designed to cover medical expenses and lost wages for employees injured on the job. However, exclusions include:

  • Injuries Outside of Work – If an employee is injured off-site during non-work-related activities, they are not covered.
  • Self-Inflicted Injuries – If an employee intentionally injures themselves, the claim will be denied.
  • Independent Contractors – Most Workers’ Compensation policies do not cover independent contractors unless they are explicitly included in the policy.
  • Violations of Company Policy – If an employee is injured while engaging in activities that violate workplace safety rules, coverage may be denied.

Commercial Auto Insurance Exclusions

Commercial auto insurance protects company vehicles but does not cover everything:

  • Personal Use – If an employee uses a company vehicle for personal reasons and is involved in an accident, the claim may not be covered.
  • Unlisted Drivers – If an unlisted driver causes an accident, the insurance may not cover the damages.
  • Intentional Damage – Any damage caused intentionally by the driver or business owner is excluded.
  • Certain Types of Cargo – Transporting hazardous materials or high-value cargo may require additional coverage.

Professional Liability Insurance Exclusions

Professional liability insurance, or errors and omissions (E&O) insurance, covers claims related to professional services, but exclusions include:

  • Fraud & Illegal Acts – Any fraudulent or illegal actions committed by a business owner or employee are not covered.
  • Breach of Contract – If a claim arises from a contract dispute rather than a professional error, it may not be covered.
  • Physical Injury or Property Damage – These are covered under general liability, not professional liability insurance.
  • Employment-Related Claims – Discrimination, harassment or wrongful termination claims require employment practices liability insurance (EPLI).

Bonding Insurance Exclusions

Bonding insurance provides guarantees against financial loss due to contract breaches, but it has exclusions as well:

  • Deliberate Misconduct – If fraud or dishonesty is involved, the bond may be voided.
  • Unapproved Changes to Contracts – If a business makes significant changes to a contract without notifying the bond provider, claims may not be paid.
  • Delays Due to External Factors – Delays caused by weather, supply chain issues or other external factors may not be covered.

How to Ensure Comprehensive Coverage

To protect your business from these common insurance exclusions, consider these strategies:

  1. Purchase Specialized Coverage
    • Flood & Earthquake Insurance – If your business is in a high-risk area.
    • Cyber Liability Insurance – Protects against data breaches and cyber attacks.
    • Crime Insurance – Covers employee theft and fraud.
    • Rideshare or Commercial Auto Insurance – Essential for businesses with company vehicles.
  2. Add Policy Endorsements or Riders
    • Business Interruption Coverage – Helps cover lost income due to a covered event.
    • Equipment Breakdown Coverage – Protects against mechanical failures.
    • Contractor’s Equipment Insurance – Covers tools and equipment used in business operations.
  3. Consider an Umbrella Insurance Policy
    • Extends liability coverage beyond standard policy limits.
    • Protects against large claims that exceed your existing coverage.
  4. Regularly Review Your Policies
    • Business needs change, and so should your coverage. Work with The Secret Insurance Agency to ensure your policies align with your current risks.

Understanding your policy exclusions can help you prepare for unexpected situations and ensure you have the right coverage in place. If you’re unsure about your current commercial insurance coverage, reach out to The Secret Insurance Agency for a policy review and personalized recommendations. Contact us today at 973.812.7327.