Commercial Insurance Guide

What is a commercial insurance company

  • index

  • small business guide to business insurance
    • introduction to business insurance
    • How can I purchase business insurance?
    • What should I expect from a broker-dealer who specializes in commercial insurance?
    • What type of insurance do I need to purchase for my business?
    • property insurance
    • commercial property
    • inland marine
    • boiler and machinery
    • crime
    • accident insurance

      • commercial car
      • business general liability
      • commercial umbrella
      • workers compensation
      • what is a business owners policy?

        How are commercial policies classified, deductibles selected and premiums developed?

        What should I know about commercial claims?


        loss control

        What if I’m having trouble finding insurance for my business?

        • surplus line insurance
        • California fair plan
        • Are there specific rules on the cancellation and non-renewal of commercial insurance?

          in summary

          summary in Spanish

          insurance diversity initiative



          talk to us

          introduction to commercial insurance

          Whether you are considering starting a new business, are a new business owner, or have owned a business for many years, business insurance can be one of the most important ongoing financial investments you make in the life of your business. Operating a business is extremely challenging without having to worry about suffering significant financial losses due to unforeseen circumstances. Business insurance can protect you from some of the most common losses business owners experience, such as property damage, business interruption, theft, liability, and work injury. Purchasing the right business insurance coverage can mean the difference between going out of business after a serious loss or recovering with minimal business interruption and financial impairment to your business operations.

          how can i buy business insurance?

          (contact a broker-agent)

          One of the first steps in purchasing small business insurance is to contact a licensed insurance agent who specializes in commercial coverages. Starting a working relationship with a trusted and competent broker can be just as crucial to your business plan as getting the professional advice of a trusted accountant, banker, human resources analyst, payroll specialist, attorney, or business mentor.

          Business contacts you’ve made are excellent reference sources for recommending a commercial lines broker-dealer, especially if the contacts are in the same industry as your company or a closely related industry.

          Professional broker and agent associations can help you in your search for a licensed commercial insurance broker and agent. Insurance Brokers and Agents of the West (IBA West) and Insurance Agents Association of the West (WIAA Group) are professional associations that can help you connect with a commercial insurance broker-agent in your local area. see the “resources” section of this brochure if you want to contact iba west or wiaa group. Also, looking in your local Yellow Pages under the insurance section can help you locate the phone numbers of broker-dealers who specialize in business insurance.

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          what should I expect from a broker-agent? / who specializes in commercial insurance?

          When conducting your broker-agent search, it is important to verify the broker-agent’s insurance license with the California Department of Insurance (CDI). The CDI is responsible for licensing all broker-dealers who sell or market insurance in California. A broker-dealer receives a fire and casualty license, which allows them to sell commercial property and casualty insurance. a fire and casualty broker is required under section 1725 of the california insurance code (cic) to prominently display his or her license in his or her office. cic 1725.5 further requires a cdi licensee to prominently print his or her license number on all business cards, written price quotes for insurance products, and print advertisements for insurance products distributed in california. See the “talk to us” section of this brochure for the many ways to contact the CDI to verify a broker-dealer’s license.

          After you’ve interviewed several broker-dealers and verified their license status with the CDI, you’ll be better able to determine the broker-dealer you’d like to do business with. While the term broker-agent is a specific license designation with the CDI, brokers and agents act in different ways to secure insurance for consumers. Brokers can sell for many insurance companies, and you typically pay them in the form of a broker fee charged for placing and servicing your insurance business. Agents are appointed by insurance companies and are paid a commission by the insurance company with which business is conducted. It is possible to approach multiple agents for quotes on your commercial insurance business, as a particular agent may represent a limited number of insurance companies.

          Initially, a broker-dealer will meet with you to discuss your trades and exposures (the possibility of loss) that are specific to your industry and type of business. If you currently have commercial insurance, the broker-agent will ask you to review your current policy. this is standard practice used to determine the current coverage you have. The broker-agent is comparing limits, exposure bases, business classifications, exclusions, and endorsements in order to analyze any gaps, errors, or overlaps that may exist in your current business policy. You are not required to share the premiums you have paid for your current or previous business insurance, but you should be forthcoming with any other information that affects your business operations. The more credible information you provide to the broker in the application process, the better the broker will be able to assess your specific insurance needs and provide you with the best options to meet those needs and protect your business from loss.

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          what kind of insurance do I need to buy for my business?

          Depending on the individual risk characteristics of your business, the broker-agent will present you with different coverage options for the purchase of business insurance. a broker-dealer proposal is just that, a proposal. When all is said and done, it is your responsibility to make an informed decision and choose the insurance that best suits your business plan. The relationship you build with a broker-agent is extremely valuable in this critical decision-making process. An experienced broker-dealer has dealt with hundreds of companies similar to yours. Since commercial insurance can be complicated, he should feel free to discuss any unclear terms, conditions, or concepts with his broker-agent. It’s part of a broker-agent’s service to answer her questions and help him understand the insurance he’s buying.

          While your business may not need all lines of business coverage, it’s a good idea to have a basic understanding of the types of insurance coverage available. As your business changes and expands, you’ll have the knowledge to purchase insurance coverage as new exposures arise. The following business lines of insurance cover broad areas of exposure common to most business operations:

          property insurance

          • commercial property
          • inland marine
          • boiler and machinery
          • crime
          • accident insurance

            • commercial car
            • commercial general responsibility
            • commercial umbrella
            • workers compensation
            • property insurance

              Business insurance is divided into two main categories: property insurance and casualty insurance. Property insurance provides coverage for property stolen, damaged, or destroyed by a covered peril. the term “homeowners insurance” includes many lines of insurance available. business property, inland marine, boilers and machinery and crime are the most common lines of business property coverage. each of these property coverage lines is described below.

              commercial property

              Coverage Sections, Insurance Limits, and Coinsurance

              The buildings you own or lease as part of your business, the personal property of your business, and the personal property of others make up the basic coverage sections of business property insurance. Commercial property insurance can be sold separately as a single line policy (called a monoline policy), or it can be sold as part of a commercial package policy (CPP), which combines two or more pieces of commercial coverage, such as property commercial, general liability and commercial auto.

              building coverage includes buildings or structures and any completed additions, which are listed on the declarations page of a commercial policy. fixtures, machinery and permanently installed equipment are also insured as part of the building coverage. The insurance limit is the estimated amount needed to rebuild your building and replace permanently installed fixtures, machinery and equipment in the event of a total loss. The insurance policy requires you to fully insure the value of your buildings. If a building is not insured for its value, it may be subject to a monetary penalty at the time of loss. this penalty is commonly known as “coinsurance.” It’s important to read and understand the coinsurance clause of your commercial property policy and discuss any questions with your broker-agent.

              business movable property consists of furniture; fixtures, machinery and equipment that are not permanently installed; Inventory; or any other personal property owned by you and used in your business.

              personal property of others means property that is in the care, custody and control of your business. The type of business you operate will determine whether you need to protect the personal property of others.

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              Covered causes of loss

              The coverage or not of a property loss depends on the text of the policy, the exclusions and the endorsements. You can choose the causes of loss covered in your property policy. Causes of loss fall into two main categories: specified risks and open risks.

              specified perils is a list of each peril that must be insured against, such as fire, explosion, windstorm, vandalism, etc. Generally, you can apply for Basic Specified Perils Coverage or Comprehensive Specified Perils Coverage. The broad coverage of specified risks is in addition to the list of covered risks found in the basic specified risks.

              open perils coverage covers all losses unless specifically excluded. earth movements (including earthquakes) and floods are two common perils that are excluded from open peril coverage. Since open perils coverage offers more comprehensive protection, it is more expensive than a specified perils policy.

              types of valuation

              Business property coverage will include a provision to determine which valuation method will be used to pay the loss. The most common policy valuation method is actual cash value (ACV). Unless otherwise defined in the policy, ACV is considered California fair market value. There are two other methods of property valuation: agreed value and replacement cost. settlement value waives any coinsurance penalty and pays 100% of the stated amount (settlement amount) for any covered loss. replacement cost covers the amount needed to replace your property with a new property of the same type and quality up to the insurance limits. Like ACV, replacement cost is subject to coinsurance.

              coverage forms and endorsements

              There are several forms of coverage and endorsements, in addition to the basic property coverages already discussed, that can customize coverage in a commercial property insurance policy. The following are the most common forms of coverage and endorsements used in commercial property insurance:

              • builder’s risk: added to a policy for a minimum term of one year to cover a new building or structure under construction or an existing structure undergoing additions, alterations or repairs. pro rata cancellation is allowed at the end of the project; however, mid-term cancellation will result in a reduced rate penalty. a reporting form or renewals form allows coverage to be done according to stage of completion (i.e. as more of the project is completed, more value is reported, resulting in the appropriate amount of coverage for each stage of construction).
              • Statutory Liability or Fire Liability: Covers your legal liability for loss or damage to the personal and real property of others as a result of your negligent acts or omissions. the loss or damage must be caused by a covered peril (including loss of use). the loss must be accidental and coverage is most often purchased for renters in commercial buildings.
              • building ordinance or law: Provides coverage if the enforcement of any building, zoning, or land use law results in the loss of the undamaged portion of the building (coverage a); costs of demolition and removal of undamaged parts of the structure (coverage b); or any increased cost of repairs or reconstruction (coverage c). replacement cost must be current for coverage to apply c.
              • improvements and enhancements : usually added by a lienholder. covers all permanently installed upgrades and improvements, which cannot be removed when a tenant vacates the building.
              • Glass: The basic perils specified for glass coverage include any resulting damage to other property from broken glass due to vandalism and also vandalism to glass building blocks. Broad and Specific Perils covers $100 per pane of glass up to $500 per incident. a form of glass should be added for scheduled glass coverage when there is significant glass exposure to secure. the glass shape includes the number of panes, dimensions, location, lettering, and ornamentation. a separate glass deductible can also be scheduled.
              • Peak Season: An endorsement that provides additional limits on personal property inventory for a designated period of time. this is specifically used to cover fluctuating inventory values ​​before and during peak buying seasons.
              • Inflation Protection: Automatically adjusts insurance limits to keep up with inflation. the adjustment can be tied to the construction cost index in a regional area or a specific percentage per year. this endorsement can be very important in helping to maintain adequate coverage limits, which can protect against potential coinsurance penalties in a property loss.
              • time element: Insurance that covers other losses arising from a direct loss from a covered peril to business property. business interruption, incidental expenses, and loss of rentals and rental value are the most common time element coverages. Business interruption coverage replaces loss of business income after a covered loss. Certain key employees may be named, allowing the employer to continue paying their wages until the business restarts after a loss. the additional expense may pay for office space, equipment rental, advertising, or most other costs deemed reasonable to keep the business in operation after a covered loss. Lost rentals and rental value cover loss of rental income to the property owner caused by damage to or destruction of a building that renders it unusable for occupancy.
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                inland sea

                With no prior knowledge of inland marine insurance, it’s easy to assume this line of insurance has something to do with shipping. In fact, inland marine insurance can cover a variety of transportation exposures; however, it does not cover transportation by boat, which is covered by ocean marine insurance. Inland marine is a specialized type of property insurance that primarily covers damage or destruction to your business property during transportation. inland marine also covers liability exposure for damage or destruction that may occur to property in its care, custody, or control during transportation.

                Covered causes of loss

                Standard inland shipping hazards may include fire, lightning, windstorm, flood, earthquake, landslide, theft, collision, derailment, overturning of the transport vehicle, and bridge collapse.

                coverage forms and/or special coverage

                inland marine has great flexibility to cover many potential transportation risks. Some of the more common types of coverage offered are accounts receivable insurance, consignment insurance, equipment floats (i.e. contractor equipment), installation floats, motor truck cargo insurance, travel and insurance of valuable documents (records). If you have questions about a particular business, please contact your broker-dealer for more information.

                boiler and machinery

                Boiler and machinery insurance can add an important layer of coverage to an insurance policy. Boiler and machinery insurance is currently marketed under such names as “systems protector,” “systems breakdown” and “machinery breakdown” insurance. Boiler and machinery insurance covers business property, other property losses, and legal fees (if any) that may result from malfunctioning boilers and machinery. Boiler coverage includes covering the costs of inspection and often maintenance of the boilers. machinery coverage can include many different types of machines used in retail, office and manufacturing settings. machinery coverage also includes major machinery systems common to most commercial buildings, such as heating, ventilation, and air conditioning systems. Since most commercial property policies exclude boiler and machinery losses, it’s important to be aware of any exposure your business may have and discuss it with your broker.


                Crime insurance provides protection for your business assets, including merchandise for sale, real estate, money and securities. it is considered a line of property insurance. Depending on the crime coverage you purchase, you may be covered for the following causes of loss: robbery, theft, larceny, forgery, and embezzlement. pieces of specialized coverage can be added based on need and exposure to loss, such as open business actions, theft insurance, merchant theft insurance, merchant safe theft insurance, comprehensive money and securities policy, theft and robbery insurance in offices, and theft and robbery from warehousemen for sure.

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                accident insurance

                Accident insurance provides coverage primarily for the liability exposure of an individual, business or organization. Liability for the negligent acts and omissions of an individual, business, or organization causing bodily injury and/or property damage to a third party is the subject of accident insurance coverage. The most common lines of business accident insurance are commercial auto, commercial general liability, commercial umbrella, and workers’ compensation.

                commercial car

                coverage, classification and insurance limits

                Business auto coverage is similar to the coverage you can have on your personal auto; however, commercial auto exposures can be more complex and require special coverage considerations based on your individual business needs. Basically, business auto coverage can protect your business from any liability arising from the cars used in your business or from any damage to the covered car. A Business Auto Policy (BAP) has the flexibility to provide coverage for business, personal, non-owned, or leased autos based on the coverage purchased and applied to each scheduled auto. in other words, the cars can be scheduled separately along with the corresponding coverages. coverage may differ by vehicle and a symbol or symbols will designate the coverage assigned to a scheduled car. these symbols are called covered auto symbols and use a simple number system (1-13). automobiles are classified by weight (light, medium, heavy, extra-heavy) and by type of use (private passenger, service, commercial). Unlike personal auto policies that have separate bodily injury and property damage limits (split limits), BAPs typically use a Combined Single Limit (CSL) for the insurance limit. this creates higher limits for both coverages, including limits per occurrence. Common commercial auto csls are $500,000 or $1,000,000.

                commercial general responsibility


                One of the key concepts of liability coverage is that it is comprehensive in nature. What this means is that the policy (insurance agreement) covers all risks within the scope of the insurance agreement that are not otherwise excluded. it is equally comprehensive in that it provides automatic coverage for new locations and activities of your business, which occur after the start of the policy and during the term of the policy. commercial general liability (cgl) is the standard commercial liability policy used to insure businesses.

                There are three main sections of coverage that make up a cgl policy: premises liability, products liability, and completed operations. Premises liability covers liability for accidental injury or property damage resulting from a condition at your premises or your ongoing operations, whether on or off your premises. A product liability risk exists for any business that manufactures, sells, handles, or distributes goods or products. danger being possible liability for bodily injury or property damage arising from its goods or products. completed operations covers your possible liability for bodily injury or property damage arising from your completed work.

                The main exclusions of a cgl policy include: intentional injuries; secured contracts; liquor liability; workers’ compensation and employers’ liability; pollution; aircraft; car; boats; Mobile Equipment; war; care, custody and control; damage to your work; deteriorated property; twinning responsibility; and noncompliance. It is always important to read and understand all coverage exclusions; however, it is particularly critical in a liability policy. If you do not understand the exclusions or limitations of the cgl policy coverage, please contact your broker-agent and discuss fully until a functional understanding is reached.


                The type of business you run determines how a cgl policy is classified. Generally speaking, a specific code or codes (in some situations) are assigned based on exposures that are common to your type of business. How a business risk is rated is the first step in determining the premium and an important part of the rating formula. merchant qualification and premium calculation will be discussed later in this booklet.

                insurance limits

                cgl’s policy has separate limits for general liability insurance, fire statutory liability, products and completed operations liability, advertising and personal liability, and medical payments. An aggregate limit of liability is in effect for general liability, fire liability, advertising and personal liability, and medical payments claims. When the total of claims for all these areas exceeds a set annual aggregate liability limit, the policy limits are exhausted and no further policy claims will be paid during the policy term. There is also a separate aggregate limit of liability in effect for product liability and completed operations claims.

                commercial umbrella

                When a liability claim exceeds the aggregate limit of liability, the policy limits are exhausted. By purchasing a business umbrella, you can protect your business from being held liable for this excess liability lawsuit. A commercial umbrella covers the amount of loss above the limits of a basic liability policy. Commercial Auto, CGL, Workers’ Compensation, or any liability policy may be covered by a Commercial Umbrella. A commercial umbrella can also provide coverage if a basic liability policy is not in force. In addition, commercial umbrellas can provide coverage for gaps in coverage of basic liability policies. When a business umbrella provides basic liability loss coverage, it doesn’t pay for the loss from the first dollar. It is common to have a self-insured retention amount (SIR) of at least $10,000. sir is similar to a deductible. If there is a commercial blanket loss and there is no corresponding underlying policy in force, you must pay the first $10,000 of the loss before the blanket policy responds.

                worker’s compensation

                When an employee suffers a work-related injury or illness, workers’ compensation insurance steps in to provide benefits based on the type of illness or injury sustained. Workers’ compensation is based on a no-fault system, which means that an injured employee does not need to prove that the injury or illness was someone else’s fault in order to receive workers’ compensation benefits for an injury or illness on the job.

                As a California employer, under California Labor Code Section 3700, you are required to provide workers’ compensation insurance from a licensed insurance carrier or through the state’s workers’ compensation insurance fund (state fund). employers may also have the option to self-insure. Your broker-agent can help you shop for workers’ compensation from a licensed insurance company and can help you with information about state funding and self-insurance.

                The state fund was established by the state legislature and is the largest provider of workers’ compensation insurance in California. The company is charged with being an open marketplace for all California employers and competing fairly with other insurers. The state fund plays a stabilizing role in the economy by providing workers’ compensation insurance at a fair price, keeping costs down by helping to keep California workplaces safe, and restoring injured workers. you can contact the state fund directly. see the “resources” section of this brochure for information.

                Coverage Sections

                Workers’ compensation insurance is divided into two sections of coverage. In Workers’ Compensation Part One, the insurance company agrees to promptly pay all benefits and compensation due to an injured worker under the state’s workers’ compensation laws listed on the declarations page of the policy. Under Employers Liability Part Two, the employer is protected against situations in which an employee may sue for injuries sustained under the common law liability (i.e., consequential bodily injury, loss of consortium, double capacity, or third party actions). ). These types of injuries in the course of employment are not covered by workers’ compensation law and, therefore, are not compensable under workers’ compensation Part One coverage.

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                classification and qualification

                The classification of workers’ compensation insurance is based on the specific functions that your employees perform in the course of their employment with your company. These ratings are developed and assigned by the Workers’ Compensation Insurance Rating Bureau (WCIRB) in most cases. Your workers’ compensation insurance carrier when working with WCIRB should use the classification codes provided by WCIRB when rating your specific policy. Insurance companies can develop and submit their own rating system to the CDI for approval, but this is rare. The insurance company assigns a specific rate to each classification, which helps determine your overall policy premium. the wcirb also generates the experience modification that must be applied to your policy. The experience modification is calculated from the loss information your insurance company is required to submit to the WCIRB annually. the wcirb provides a member ombudsman who is available to answer questions from employers about classification, change in experience, and qualification issues. see the “resources” section at the end of this booklet for contact information about the wcirb and your insured advocate.


                It is important to note that workers’ compensation claims are not under the jurisdiction of the cdi. The California Department of Industrial Relations, Division of Workers’ Compensation can help you with your questions or concerns regarding workers’ compensation claims. You can contact the California Department of Industrial Relations using the information provided in the “resources” section of this brochure. In addition, you should be able to discuss any general workers’ compensation claim issues with your broker or discuss issues about a specific claim with the claims adjuster your insurance company has assigned to the case.

                what is a business owners policy?

                Designed specifically for small businesses, a business owner’s policy (BOP) is a commercial combination policy that covers property, general liability and business interruption. is written with strict underwriting guidelines that include maximum square footage allowed for office, retail, or apartment perils. a bop is more appropriate for small “main street” businesses such as: hardware stores, barbershops, greeting card stores, accounting offices, or low-density apartment buildings. Discuss the option of a bop with your broker-dealer, as the premium for companies that qualify can be very competitive.

                How are commercial policies classified, deductibles selected and premiums developed?

                How a policy is rated determines how the policy premium is developed. qualifying factors vary depending on the line of insurance you are purchasing. If you’re purchasing commercial property insurance, the building’s rating formula is based on factors including square footage, type of construction, with or without sprinklers, and fire protection rating. If you are purchasing general liability insurance, the rating formula may be based on square footage, payroll, or gross sales, depending on the general liability classification codes used. these are known as rating exposures.

                Once qualifying exposures are identified and deductibles are selected (usually from the information you provided on the application), the premium is calculated using a simple formula: rate x exposure = premium. the deductible amount you choose will be calculated in the rate. the higher the deductible (the amount you choose to self-insure), the lower the rate. by using higher deductibles, you can lower your premium cost; however, you don’t want to jeopardize your company’s financial future by choosing deductibles that are too large. Talk to your broker about the deductible options available to you when purchasing business insurance.

                The basic rating equation typically uses other modifying factors, which may include experience modifications, schedule rating, or judgment rating. Because rating formulas can range from simple to complex, depending on the line of insurance, it’s important to discuss how your policy is rated and how the policy premium is calculated with your broker-agent.

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                what should I know about commercial claims?

                Depending on the type of loss your business experiences, the duties and responsibilities you require in a claim can be numerous. It’s important to remember that your broker-dealer can help you through the entire claims process. In many cases, your broker-agent will be your first point of contact when filing an insurance claim. Whether you contact your broker-agent or the insurance company directly when filing a claim, you are required by your insurance contract to report all claims in a timely manner. this allows the insurance company to process the claim and conduct their investigation as quickly as possible.

                Since business claims tend to be more complex, it is important for the business to assess the claim quickly to mitigate any situation that may have the potential to increase losses. this is especially crucial in liability claims, as large amounts of money can be at stake. When claims are not handled early in the claims process, third-party litigation can arise. Litigation can be costly and often ends in a much higher judgment than if an experienced claims representative had handled the claim from the start. That is why it is necessary to submit all claims to your broker-agent or insurance company as soon as you become aware of the claim. Trying to handle the claim yourself violates your duties under the insurance contract and can be costly in the long run.

                Most business owners know that claims loss experience is reflected in the rating formula and directly affects premium costs. By fulfilling the duties outlined in your contract regarding claims, you are a partner with your insurance company in helping keep claims costs to a minimum, which in turn helps keep premium costs low .

                The better your claims experience, the more modification is allowed to lower your premium. When you first receive your policy, contact your broker-agent to discuss all the duties and responsibilities you require under the contract.


                The deductible on a commercial policy is the portion of the loss you pay up front before your insurance company pays a claim. Based on the deductible amount stated in your policy, the insurance company will pay up to the policy limits when a claim is covered after you have paid the deductible. The type of deductible used in a commercial policy is called the “absolute dollar amount.” The higher the absolute dollar amount (deductible), the lower your premium.

                loss control

                One of the most effective ways to decrease the frequency and potential severity of claims is through loss prevention and control. Most commercial insurance companies have their own loss prevention departments; however, some insurers rely on contracted loss prevention services. Loss control services are typically integrated into higher-risk, higher-premium accounts as part of the complete insurance package. If you’re a small business owner, you can still benefit from proven loss control methods. Depending on your type of business exposure, your broker-dealer can offer suggestions on how to better control loss exposures common to your business. The broker-dealer along with your account underwriter, claims representative, and loss control representative can create a comprehensive loss prevention program that includes specific modifications and procedures to follow that can help create a cleaner workplace. sure. These programs may even include an employee safety program that incorporates rewards and tips. Involving your employees in loss control makes good business sense. Creating a safe work environment benefits everyone. When proven loss control methods are in place, the public and workers are better protected, and premium costs are reduced as the loss experience improves.

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                What if I’m having trouble finding insurance for my business?

                Most businesses will have no difficulty obtaining insurance in the standard insurance market with the help of a qualified broker-agent. however, if your business has experienced significant losses, your business is considered to be involved in high-risk operations (with a higher likelihood of frequency or severity of claims), or if you have recently started your business, you may not be able to find insurance. in the standard commercial insurance market. Your broker-agent can explain the options you may have to shop for and obtain business insurance elsewhere.

                surplus line insurance

                When a licensed commercial insurance company has denied three applications (and has written documentation of the refusal to insure), you may proceed to obtain insurance from the surplus lines market. Sometimes called the “unsupported” market, surplus lines companies offer insurance to businesses that cannot find insurance in the standard lines insurance market. While these companies are not licensed by the CDI, they must go through an approval process that includes providing evidence of minimum capital and surplus requirements. When these requirements have been met to the CDI’s satisfaction, the CDI may approve the company to do business in California and subsequently add them to the list of eligible surplus line insurers (commonly known as the Lesli list).

                A surplus line company can only be accessed through a specially licensed broker. The broker must have a surplus line license issued by the CDI in order to sell surplus line insurance. Before you buy insurance from a surplus line insurance company, your broker must provide you with a disclosure notice under cic section 1764.1 that the insurance you are buying is being issued by a surplus line company.

                Although surplus lines insurers must follow fair claims settlement practices rules (regulations that govern how insurers handle claims), the CDI has limited jurisdiction over the operation of surplus lines insurers. If the company becomes insolvent (bankrupt), your only course of action will be through the courts. The California Insurance Guaranty Association (CIGA), which protects claims with admitted insurers, does not apply to surplus lines insurers. A surplus line broker must be able to provide information on the financial strength of any surplus line company he represents. You can also contact the many independent rating organizations that review the creditworthiness of insurance companies using the information provided in the “resources” section of this brochure. After verifying the financial solvency of the surplus line company, you can also verify that the surplus line company is CDI approved and currently on the Lesli list. you can contact the cdi through the information located in the “talk to us” section at the end of this brochure to verify if a surplus line company is on lesli’s list.

                California fair plan

                The California Fair Plan has been in place since 1968 to provide basic property insurance to homeowners who are unable to obtain insurance in the standard market. Although the California Fair Plan was established by the legislature, it is not a state agency. is an association of all licensed property insurers in the state, who participate based on the percentage of property insurance they write in california. The California Fair Plan was established to ensure homeowners’ stability and affordability of property insurance. Most California Fair Plan businesses are located in designated urban areas, downtown areas, and in areas subject to destructive wildfires. While the California Fair Plan primarily writes policies for owners of personal property (homeowners), they write a small percentage of policies for commercial property owners. Any broker-agent can help you place a business property policy with the California Fair Plan. You can also request an application and information brochure from the California Fairs Plan directly using the contact information available in the “Resources” section of this brochure.

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                Are there specific rules on cancellation and non-renewal of commercial insurance?

                Commercial insurance companies must follow the rules established in the insurance code regarding the cancellation and non-renewal of commercial insurance. There are separate sections of the insurance code that cover cancellation and non-renewal of workers’ compensation, auto, marine ocean, surplus line, reinsurance policies, and other commercial lines of insurance; therefore, it may be a good idea to contact the cdi for a full explanation if you have any issues with cancellation or non-renewal notices. If you’re not sure what your rights are under the insurance code, contact the cdi by any of the methods listed in the “talk to us” section of this booklet.

                in summary

                Commercial insurance by its very nature is complex. however, it is possible, with the help of a competent licensed broker-dealer, to avoid the pitfalls and make good decisions when purchasing insurance for your business. This brochure is intended to be a starting point for the small business owner researching business insurance coverages.

                Throughout the brochure, general information has been provided on the main areas of concern when it comes to commercial insurance. For further clarification on any commercial insurance topic, please contact the CDI through the information provided in the “talk to us” section. In addition, this brochure has a “resources” section, as well as a “glossary” that may be of further assistance to you in providing answers to questions you may have about business insurance.

                English summary

                This brochure provides valuable information on the following topics:

                introduction to commercial insurance

                How can I purchase business insurance?

                what should I expect from a broker-agent

                who specializes in commercial insurance?

                What kind of insurance do I need to buy for my company?

                property insurance

                • commercial property″
                • maritime within the country
                • boilers and machinery
                • crime
                • insurance against third parties

                  • commercial vehicles″
                  • business general liability″
                  • extended business liability″
                  • worker’s compensation
                  • what is a business owner’s policy?

                    How are commercial policies rated, how are deductibles selected, and how are premiums determined?

                    what do I need to know about commercial claims?

                    What if I have trouble getting insurance for my business?

                    surplus lines insurance

                    California fair plan

                    Are there specific rules for the cancellation and non-renewal of commercial insurance?

                    This brochure is available in Spanish on our website at insurance.ca.gov. select translate spanish on the right of the screen. select the consumer tab choose the types of insurance, select information guides, then select commercial series.

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                    insurance diversity initiative

                    general description

                    The Insurance Diversity Initiative (IDI) was established by Insurance Commissioner Dave Jones in 2011 in an effort to focus on diversity issues within California’s $259 billion insurance industry. Specifically, these efforts, both by Department staff and the Commissioner’s appointed Insurance Diversity Task Force, are intended to encourage greater acquisition of California’s diverse providers and diversity among insurer boards of directors. this initiative represents an open door to increased business opportunities for california’s minority, women, disabled veteran and lgbt-owned businesses. The department accomplishes these goals by conducting surveys to collect and publicize information about insurers’ diversity efforts, as well as through department-organized outreach, partnerships, and events. The commissioner’s first action was a 2011 voluntary survey sent to the state’s major insurers to understand the state of provider diversity and board diversity in the industry. since then, the initiative has administered annual surveys to ensure transparency around these important diversity issues.

                    In May 2016, Commissioner Jones announced a new multistate initiative, the Multistate Insurance Diversity Survey. the mids initiative was established by insurance commissioners in six states: california, district of columbia, minnesota, new york, oregon, and washington, in an effort to focus on diversity issues within the company’s $1.78 billion insurance industry. nation. Between 2012 and 2015, insurers increased their purchases of diverse California companies by $586.6 million. mids will now build on california’s success in looking at diversity issues in the nation’s insurance industry.

                    diversity of suppliers

                    Provider diversity, as seen in other industries, is beneficial to both individual companies and insurers. For California’s diverse businesses, this initiative represents an open door to a previously seemingly impenetrable market, thereby increasing business opportunities. For insurers, increased partnerships with multiple providers can result in lower costs and more competition for offerings, as well as increased quality, creativity and innovation from those providers, giving insurers the edge they need. they need in a competitive market with rapidly changing demographics.

                    The Insurance Provider Diversity (ISD) Survey is a biennial survey that requires all insurance companies with written premiums of $100 million or more in California to report their procurement efforts with diverse companies in California. For the first time in history, information about insurers’ contracting practices is being collected and made available to the public.

                    diversity of the board of directors

                    Recent reports demonstrate a strong correlation between the diversity of an organization’s leadership and the level of its success in supplier diversity.

                    The Board of Directors Diversity (GBD) Survey examines the state of diversity among insurer boards of directors and requires all companies with written premiums of $100 million or more in California to report on: 1) the demographic composition of the board; 2) the leadership of the various board members; and 3) the company’s outreach efforts and strategies to diversify its board membership.

                    The gbd survey is also the first survey of its kind in the nation and is intended to encourage insurance companies to seek diverse leadership and boards of directors that reflect california and the nation’s changing demographics.

                    contact us

                    For more information on the Insurance Diversity Initiative, visit: www.insurance.ca.gov/[email protected] | (916) 492-3382


                    a.m. best company

                    ambest road oldwick, new york 08858

                    phone: 908-439-2200

                    website: www.ambest.com

                    California Department of Industrial Relations

                    division of workers compensation (dwc)

                    PO Box 420603 San Francisco, CA 94142

                    phone: 800-736-7401

                    website: www.dir.ca.gov

                    California Department of Industrial Relations

                    office of self-insurance plans (osip)

                    11050 olson drive, suite 230, rancho cardova, ca 95670

                    phone: 916-464-7000

                    website: www.dir.ca.gov

                    California fair plan

                    PO Box 76924 Los Angeles, CA 90076-0924

                    phone: 213-487-0111 or 800-339-4099

                    website: www.cfpnet.com

                    fitch ratings

                    33 whitehall street, new york, ny 10004

                    phone: 212-908-0500 or 800-753-4824

                    website: www.fitchratings.com

                    independent insurance brokers and agents of california (iiabcal)

                    7041 koll center parkway, suite 290

                    pleasanton, ca 94566-4041

                    phone: 800-772-8998

                    moody’s investor service

                    7 world trade center,

                    250 ​​greenwich street, new york, ny 10007

                    phone: 212-553-1653

                    website: www.moodys.com

                    standard & poor

                    1 california street, 31st floor

                    san francisco, ca 94111

                    phone: 415-371-5000

                    website: www.standardandpoors.com

                    state compensation insurance fund

                    p.o. box 8192 pleasanton, ca 94588

                    phone: 888-782-8338

                    website: www.statefundca.com

                    weiss ratings

                    4400 northcorp pkwy

                    palm beach gardens, fl 33410-9998

                    phone: 877-934-7778

                    website: www.weissratings.com

                    western insurance agents association (wiaa group)

                    11190 sun center drive, #100, rancho cordova, ca 95670

                    phone: 800-553-4221

                    website: www.wiaagroup.org

                    workers’ compensation insurance rating bureau (wcirb)

                    1221 broadway, suite 900, oakland, ca 94612

                    phone: 888-229-2472 ombudsman 415-778-7159

                    website: www.wcirb.com

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                    actual cash value

                    Unless otherwise defined in the policy, California actual cash value means fair market value. The fair market value of an item is the dollar amount that an informed buyer (with no unusual pressure) is willing to pay and an informed seller (with no unusual pressure) is willing to accept.


                    a person or organization licensed to sell and service insurance policies for an insurance company.

                    aggregate limit

                    the maximum dollar amount of coverage in force for a property damage or liability policy. this maximum amount can be calculated per occurrence or as a general aggregate for the full term of the policy.

                    agreed value

                    a method of loss assessment in which the insured and the insurer list an agreed amount to be paid in the event of a loss. This valuation method is most common in property insurance when insuring valuable works of art, antiques, or classic cars. a professional appraisal is usually required.

                    arbitration clause

                    a clause in an insurance policy that allows the insured and the insurer to appoint an arbitrator if they cannot agree on a suitable claim settlement. Once the arbitrators are selected, they in turn appoint an independent arbitrator. if the arbitrators disagree, then the arbitrator decides which claim to support. the final decision is binding.


                    a situation that occurs at a loss when an old property is replaced by a new item. the insured is in a better financial position than before the loss occurred and, as a result, may have to pay the difference in price for the improvement.


                    a short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.


                    a licensed person or organization that sells and services insurance policies on your behalf.


                    a licensed person who may act as an agent representing one or more insurers, and also as a broker dealing with one or more insurers representing their interests.


                    the termination of an insurance contract in force by the insured or the insurer before its normal expiration date.


                    notice an insurance company that a loss has occurred that may be covered under the terms and conditions of the policy.

                    claims adjuster

                    the person who assesses the damage caused by a covered loss and determines the amount to be paid under the terms of the policy.

                    statements made

                    a liability insurance policy in which coverage applies to claims made during the policy period, regardless of when the loss occurred, subject to a retroactive start date.


                    an insurance clause that defines the amount of each loss that the company pays according to the amount of insurance contracted, divided by the amount of insurance required. this basic formula relates to a contracted percentage of coverage that must be required to avoid a coinsurance penalty.

                    combined single limit

                    when bodily injury liability and property damage liability are expressed as a single amount (limit) of coverage.

                    commercial lines

                    Insurance coverage for companies, commercial institutions and professional organizations, unlike personal insurance.


                    a portion of the policy premium that the insurance company pays to an agent as compensation for the agent’s work.

                    concurrent causality

                    occurs when two or more hazards cause a loss. when only one of these perils is covered by the insurance policy, the court usually rules that the entire loss is covered. Many insurance companies have reworded their policies to clarify that only a loss attributed to a covered peril is actually covered.


                    the part of an insurance contract that establishes the rights and duties of the insured and the insurer.

                    consequential bodily injury

                    In workers’ compensation, special circumstances can arise when a work-related injury causes some type of non-work-related injury. (see glossary for definitions of loss of consortium, dual capacity, and third parties).


                    protection provided under an insurance policy.

                    declarations page (dec)

                    usually the first page of an insurance policy that contains the full legal name of the insurance company, the policy number, the effective and expiration dates, the premium payable, the amount and types of coverage, and the deductibles.


                    the amount of the loss that the insured is responsible for paying before the benefits of the insurance policy are paid.


                    the actual or accounting recognition of the decline in property value over a period of time according to a predetermined schedule.

                    double capacity

                    In workers’ compensation, an employer may be liable in two ways to an employee who suffers bodily injury on the job as a result of the use of a product or service produced by that employer. the employee is eligible for workers’ compensation benefits and can also sue the employer because of the imperfection of the product or service that caused the injury.

                    premium earned

                    the portion of the policy premium paid by an insured that has been allocated to the insurance company’s experience of losses, expenses and gains to date.


                    a written agreement that changes the terms of an insurance policy by adding or removing coverage.

                    effective date

                    the start date of an insurance policy: the date the policy goes into effect.


                    a contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.

                    experience modification

                    the premium adjustment resulting from the use of the experience rating. experience rating plans reflect an insured’s past loss experience (usually the last three years) and use this experience to modify and determine the premium for the current policy year.

                    expiration date

                    the termination date of coverage as stated in an insurance policy.

                    first party

                    the policyholder (insured) in an insurance contract.

                    flat cancellation

                    cancellation that takes place on the effective date of the policy. no premium charged; however, other charges (ie service) may apply.


                    an intentionally deceptive act committed to gain an unfair or illegal advantage. fraud usually involves a monetary gain.


                    the number of times a loss occurs.


                    a circumstance that increases the likelihood or potential severity of a loss.


                    In a property and casualty contract, the goal is to restore an insured to the same financial position after the loss that the insured was in before the loss. In the most basic sense, indemnity is compensation for a loss.

                    independent adjuster

                    a person or organization that provides loss adjusting services to different insurers on a contract basis.

                    insurable interest

                    any interest (most commonly property) that a person, business, or corporation has in an insurance subject, such as a business, building, or automobile, that may be damaged and may cause the person, business, or corporation financial loss or other hardship tangible. In general, an insurable interest must be demonstrated when a policy is issued and must exist at the time of loss.


                    a method of transferring risk from a person, company or organization to an insurance company in exchange for the payment of a premium. the insurance company agrees to be responsible for the covered losses.


                    the policyholder(s) entitled to coverage under an insurance policy.


                    the insurance company that issues the insurance and agrees to pay for losses and provide covered benefits.

                    insurance contract

                    the part of an insurance contract that describes what is covered. The insurance contract generally states the perils insured against, the person(s) and/or property covered, the location of the property, and the period of the contract.

                    judgment qualification

                    a rating modification (either downgrade or upgrade) that is based on the experience, best judgment and analysis of underwriters in classifying and underwriting a particular type of risk.


                    In property and casualty insurance, a lapse in rescission of a policy due to failure to pay the premium when due.

                    civil liability insurance

                    Coverage for the policyholder’s legal liability resulting from injury to others or damage to their property.


                    a certificate of authority issued by the cdi to an insurer, agent, broker, or broker-dealer to transact business in insurance. the maximum amount of benefits the insurance company agrees to pay in the event of a loss.

                    loss of consortium

                    a potential situation in any bodily injury claim (including workers’ compensation claims) where a spouse contends that his or her partner’s bodily injury deprives him or her of the natural affection (spousal duties), help, and companionship of that spouse.

                    loss payable clause

                    a provision that authorizes the insurer to pay a loss to a person, business or organization (loss beneficiary) other than the insured. The beneficiary of the loss must have an insurable interest (such as a commercial personal property lien or a real property mortgagee).

                    managing general agent (mga)

                    an agent authorized by contract by an insurance company to manage all or part of the business activities of the insurer. An MGA may manage the marketing, underwriting, policy issuance, collection of premiums, appointment and supervision of other agents, claims payments, and reinsurance negotiations for an insurance company.

                    material misrepresentation

                    a misrepresentation of fact made in such a way that the insurance company would have refused to insure the risk if the truth had been known at the time the policy was issued. a material misrepresentation gives the insurance company grounds to terminate a contract.


                    an incorrect estimate of an insurance premium.

                    non-payment of premium

                    failure by a policyholder to pay a policy premium or pay premium installment payments due on a policy.


                    the termination of an insurance policy on its normal expiration date.


                    a liability insurance policy that covers claims arising from events that occur during the term of the policy, regardless of when the claim is filed.


                    cause of loss.

                    personal lines

                    Insurance written on a person’s (or persons’) real and personal property to include policies such as homeowners insurance and personal auto insurance, as opposed to business lines.


                    a contract that establishes the rights and duties of the insurance company and the insured.


                    the monetary payment that an insured makes to an insurance company in exchange for the contract that indemnifies the insured against potential losses. Simply said, it is the payment made by the insured to keep an insurance policy in force.


                    term used by the insurance industry to refer to agents, brokers, broker-dealers, and attorneys.

                    prorated cancellation

                    a cancellation of a policy by an insurance company that returns unearned premium to the policyholder (that portion of the premium corresponding to the remaining period of time the policy will not be in force).


                    the statement of policy conditions in an insurance policy.

                    public adjuster

                    a licensed person or organization that represents the policyholder by contract in negotiations of property damage claims with an insurance company.


                    an estimate of the cost of insurance based on information provided to the agent, broker, broker-dealer, or the insurance company.


                    the cancellation of an insurance policy on its effective date resulting in the return of all premiums collected.


                    requirements drawn up by the cdi that implement the laws approved by the legislature. regulations go through a public comment process and must be approved by the state office of administrative law.


                    the restoration of an expired or canceled policy.


                    the continuation of an insurance policy (renewal offer) to a new term from the same insurance company that issued the existing policy.

                    replacement cost

                    the amount it costs to replace lost or damaged property with new property of the same type or quality on the local market.

                    schedule qualification

                    a method of pricing property and liability insurance. The rating program uses debits and credits to modify a base rate calculated for the special characteristics of the risk exposure. Insurers develop the scale classification because actuarial experience shows a direct relationship between certain physical characteristics and the possibility of loss. most schedule qualification plans must be submitted to and approved by the cdi.

                    second part

                    the insurance company in an insurance contract.

                    self-insured withholding (sir)

                    the portion of a property or liability loss retained by a policyholder.


                    the size of a loss. the severity of the loss is used as a factor in setting premium rates.

                    short rate cancellation

                    a cancellation initiated by the request of the policyholder in which the returned premium is subject to an administrative penalty.

                    brotherhood responsibility

                    exists when a manufacturer refuses to recall a product as ordered by a government agency or company management. once a defective product has been identified and recalled, an insurance company excludes all further claims arising from the defective product due to the company’s failure to negligently recall the product.

                    split limits

                    the technique of expressing the limits of liability coverage under a particular insurance policy by establishing separate limits for different types of claims arising from a single event or a combination of events. coverage may be divided (limited) per person, per incident, between bodily and property damage, or in other ways.


                    the process of recovering the amount of the claim for damages paid to a policyholder from the legally responsible party. When a company goes after the legally responsible third party, it is required to include the policyholder’s deductible in the recovery process.


                    a person other than the policyholder or the insurance company who has suffered a loss and may collect compensation under the policy due to the negligent acts or omissions of the policyholder.

                    third over

                    the legal doctrine that involves an injured employee bringing a lawsuit against a third party who (for one reason or another) may bring an action against the employer.


                    the process for evaluating the insurance application and independent sources to verify the information provided and determine the acceptability of the risk.


                    the person who performs the underwriting process to accept, reject or modify risks on behalf of the insurer.

                    unearned premium

                    the portion of the written premium applicable to the unexpired or unused portion of the policy period for which the premium was paid. for example, in an annual premium policy, 11/12 of the premium is not earned at the end of the first month of the policy.


                    the waiver of a known right, which may be express or implied.

                    written premium

                    the total premium for all policies underwritten by an insurer during a specified period of time, regardless of which portion was earned.

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                    talk to us

                    Do you have any questions, comments or concerns? there are several ways to talk to us:

                    • Call our consumer hotline at (800) 927-4357
                    • telecommunications device for the deaf dial tty (800) 482-4833
                    • write: california department of insurance
                    • 300 South Spring Street, South Tower

                      los angeles, ca 90013

                      • Please visit us in person on the 9th floor at the address above.
                      • office hours:

                        Monday to Friday from 8:00 a.m. to 5:00 p.m.

                        pacific standard time, excluding holidays

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