Insurance Handbook - Alaska Department of Community and ...

Insurance Basics
Business Insurance
There are two major forms of liability insurance policies a business can select:
occurrence and claims made. Both types of policies have their advantages.
• Occurrence Policy: An occurrence policy covers a business for harm to
others caused by incidents that occurred while a policy is in force, no
matter when the claim is filed. For example, a person might sue a business
in 2010 for an injury stemming from a fall in 1999. The policy that was in
place when the incident occurred (i.e. 1999) will apply, even if the company
now has a policy in place with higher limits. Occurrence coverage may not
be available in some states or for some industries or professions.
• Claims Made Policy: A claims made policy covers the business based on
the policy that is in force when the claim is made, regardless of when the
incident occurred. In the above example, the limits in the policy in effect
in 2010 would apply. Businesses with claims made policies can purchase
optional “tail coverage.” Tail coverage enables a business to report claims
after the policy has ended for alleged injuries that occurred while the policy
was in effect.
3. Commercial Vehicle Insurance
A commercial auto policy provides coverage for vehicles that are used primarily
in connection with commercial establishments or business activities. The
insurance pays any costs to third parties resulting from bodily injury or property
damage for which the business is legally liable up to the policy limits.
While the major coverages are the same, commercial auto policies differs
from a personal auto policy in a number of technical respects. They may have
higher limits and/or provisions that cover rented and other non-owned vehicles,
including employees’ cars driven for company business. Several insurers offer
business auto policies geared to owners of small businesses or specific types of
businesses.
4. Workers Compensation Insurance
Employers have a legal responsibility to their employees to make the workplace
safe. However, despite precautions, accidents can occur. To protect employers
from lawsuits resulting from workplace accidents and to provide medical care
and compensation for lost income to employees hurt in workplace accidents,
in almost every state businesses are required by law to buy workers compensation
insurance. Workers compensation insurance covers workers injured on the
job, whether they are hurt on the workplace premises or elsewhere, or in auto
accidents while on business. It also covers work-related illnesses. Workers com-
12 I.I.I. Insurance Handbook www.iii.org/insurancehandbook