Commercial Insurance in Pennsylvania
Commercial insurance in Pennsylvania is a form of insurance that offers protection to businesses in the Commonwealth. It is also called business insurance. In Pennsylvania, some commercial insurance variations are:
Coverage for storms, floods, and other natural disasters
Coverage for home-based businesses (homeowners insurance may not provide enough coverage for businesses run from the home)
Workers compensation insurance
Commercial auto insurance
Health insurance for businesses
According to the Pennsylvania Department of Community and Economic Development, there are about 1 million small businesses in Pennsylvania, representing more than 99% of the businesses operating in the Commonwealth. Hence, having commercial insurance is imperative to protect the various business investments in the Commonwealth. The Pennsylvania Insurance Department (PID) regulates commercial insurance activities, ensuring that commercial insurance providers equitably offer quality insurance services. Small businesses and corporations can customize insurance plans with the insurer depending on the needs of the company and its financial ability.
Using the professional services of Pennsylvania-licensed commercial insurance agents to purchase commercial insurance in the Commonwealth is highly recommended. Commercial insurance agents ensure a seamless insurance policies procurement for businesses by doing the following:
Reviewing the insurance needs of the company
Assessing the financial standing of the business
Conducting an in-depth analysis of the required coverages
Scouting for the best deals through industry relationships that have been developed over time
Why Do we Need Commercial Insurance?
In 2022, businesses in Pennsylvania had over 6 million employees on payroll. Hence, commercial insurance is important in ensuring that businesses remain in operations and their employees remain engaged by obtaining coverage to prevent financial losses. Pennsylvania businesses need commercial insurance for the following reasons:
The law requires some form of commercial insurance: Pennsylvania law requires employers to carry worker's compensation insurance. Therefore, employers, per the Pennsylvania Workers Compensation Act, must maintain worker's compensation insurance for all employees in case they are injured on the job or in case fatal accidents occur. Failure to provide this insurance for workers may expose the business to fines and other penalties
Protection from lawsuits and other similar liabilities: Business activities are sometimes filled with uncertainties. So, purchasing a commercial insurance policy is usually financially prudent and can protect the business from lawsuits and financial losses arising from such uncertainties. For example, accidents, broken contracts, disgruntled employees, and clients can open the business up to litigations or financial penalties that can potentially lead to bankruptcy
Commercial insurance improves credibility: Prospective clients, hires, and financiers will be more confident working with a business carrying commercial insurance. For example, a logistics business often shows off signage containing the statement “licensed, bonded, and insured.” This boosts the credibility of the business before potential clients
Protect income and ensure business continuity. If a natural disaster occurs, a business may be forced to close down to rebuild and fix damages. During this period, there is a lost income. A business owner's insurance, a form of commercial insurance plan, will protect the business's income, ensuring that even when the business cannot operate, the owner, staff, and other responsibilities are properly catered for through the supplementary income provided by the insurer. A business owner's insurance plan will also cater to normal operating expenses such as rent, electrical, and other utility bills. Some business owners' insurance plans allow businesses to include coverage that will ensure employees are paid for up to 12 months if income is disrupted
Employee protection: While the Commonwealth mandates worker's compensation insurance, businesses may want to go the extra mile to provide additional coverage to boost employee morale and ensure that the employees are protected from a covered peril, given that employees are the most valuable asset a business has. For example, businesses can opt to provide health and disability insurance to employees for an extra cost
Insulation from “acts of God”: Insurance companies refer to acts of God as events that are not caused by human errors or missteps. Acts of Gods include floods, hurricanes, tsunamis, and other natural perils. Businesses need commercial insurance to receive coverage against these forms of perils
Commercial insurance incentivizes employees and attracts the best talents to the company: Apart from salary packages, employees and talents seek insurance incentives. Businesses that do not offer these may miss out on the best talents and have employees with lower morale and lower retention rates
Some contracts may require commercial insurance: Some financiers and clients will require one form of commercial insurance or the other once in a contractual relationship with the business
Protection of key human assets: Commercial insurance, like the key person or key man insurance, ensures protection in case of the death or disability of a high-profile employee
To get a commercial insurance quote, business owners and/or their representatives in Pennsylvania should always consult with state-licensed commercial insurance agents. Knowledgeable agents will offer professional advice and can help interested businesses procure all relevant commercial insurance coverages.
How Does Commercial Insurance Work in Pennsylvania?
Commercial insurance is an integral part of the financial economy of Pennsylvania. A 2020 report published by the National Association of Insurance Commissioners shows that Pennsylvania ranked 6th out of all the states in the total number of domestic and licensed foreign insurers operating within the Commonwealth. Also, more than $1.9bn of Commercial Multi-Peril (MP) Insurance premiums were written in 2020. Given this figure, it is easy to deduce that businesses actively seek to have commercial insurance plans. In Pennsylvania, commercial insurance offers business protection from liabilities that may arise when an employee is injured while working, if a contract is broken and the client chooses to sue, or other similar scenarios.
An essential step in selecting a commercial insurance plan in Pennsylvania is examining the business's insurance needs and determining its financial capacity to pay insurance premiums. It is always best to use the services of a licensed commercial insurance agent in Pennsylvania while choosing business insurance coverage.
While no blanket laws require all types of commercial insurance policies for businesses in Pennsylvania, the Commonwealth mandates businesses to provide worker's compensation insurance. Businesses operating without commercial insurance can be exposed to potential bankruptcy arising from liabilities and lawsuits. When a business or its representative is set to purchase commercial insurance plans, it is always best to work with a commercial insurance broker or agent to get insurance. Brokers and agents are important as they understand the industry's inner workings and know how to get the best deals tailored to the needs of the business.
What is Commercial Insurance in Pennsylvania?
Commercial insurance is also referred to as business insurance. In Pennsylvania, commercial insurance policies protect a business from lawsuits, financial penalties caused by injuries, property damages, or any other covered peril.
Below is a breakdown of the commercial property and casualty landscape in Pennsylvania:
| COMMERCIAL (P&C) INSURANCE in PENNSYLVANIA
(at a glance) |
||
| Type of Commercial Coverage | Commercial Coverage | % of all Commercial P&C in PA |
| Commercial Liability | General Liability | 25% |
| Commercial Property | Fire + Allied Lines | 7% |
| Commercial Auto | Liability | 12% |
| Workers Compensation | Workers Comp | 9% |
| Commercial Property | Commercial Multiple Peril (CMP) | 7% |
| Commercial Transportation | Inland Marine | 7% |
| Commercial Liability | Medical Professional Liability | 5% |
| Commercial Auto | Collision | 2% |
| Commercial Transportation | Ocean Marine | 2% |
What are the Types of Commercial Insurance in Pennsylvania?
Commercial policies in Pennsylvania can be broadly categorized into four types:
Commercial property insurance
Commercial liability insurance - professional, and general liability coverage
Commercial health insurance (employer health plans + workers’ compensation)
Commercial life insurance
COMMERCIAL PROPERTY Insurance in Pennsylvania
In 2020, more than $26 billion in premiums was paid towards property and casualty insurance by businesses in Pennsylvania. Commercial property insurance in Pennsylvania is a commercial insurance product that pays for repairs if the building or property where an insured business operates is damaged by lightning, fires, windstorms, or other covered perils. Businesses are usually encouraged to purchase commercial property insurance tailored to their specific needs. For example, some insurers can help cover the costs of reproducing lost documents or provide temporary holding facilities for such documents while the business’s property is undergoing repairs.
Several insurers in Pennsylvania also offer risk exposure analytics to help businesses to determine the operational policies and procedures to correct in order to prevent accidents and other perils. Commercial property insurance can kick in in the event of the following incidents:
Fire destroys business properties like the warehouse, equipment, or other inventory
Winds that destroy business properties
An armed robbery incident or a case of theft
In Pennsylvania, commercial property insurance offers the following coverage:
Building/Property Coverage - It covers businesses with buildings and properties at the core of their operational design from any damages done to the building
Business Personal Property Coverage - Business personal property coverage protects properties owned by a business at locations specified in the policy contract. Such properties may include furniture, pieces of equipment, and other inventory. Note that business personal property coverage provides little or no protection to business properties when they are no longer at the location specified in the policy contract
Inland Marine Coverage - This protects business properties regularly moved off-site from locations specified under the business personal property coverage policy.
Business Interruption Coverage - This is sometimes referred to as business income insurance. This coverage provides income for a business when the business is unable to operate. Typically, an insurer will compensate an insured business with this coverage with income lost and other fixed expenses for the period the business operations were disrupted. This coverage also offers financial compensation if national or Pennsylvania civil authorities limit customer access to the premises of an insured business
Electronic Data Processing (EDP) Insurance - This insurance coverage is a unique form of commercial property insurance designed to protect computers and other data centers that are integral to a business's operations. EDP also covers electrical damages caused by power surges or malicious hacker and virus attacks
In Pennsylvania, businesses can add flood insurance as an endorsement to an existing commercial property insurance. The business owner or representative can speak with the insurer to include flood coverage under the commercial property insurance or get covered by the National Flood Insurance Program (NFIP).
In Pennsylvania, various commercial property insurance forms exist, and insurers often allow business owners and representatives to bundle plans to get the most coverage. To get the most out of a commercial property insurance policy, a business owner of their representative should work with a Pennsylvania-licensed commercial insurance agent when procuring it. An experienced agent will understand the coverages required by a business based on their discussion with the business owner or representative.
COMMERCIAL LIABILITY Insurance in Pennsylvania
Commercial liability insurance is a form of commercial insurance that protects a business from losses caused when a client or other third party is injured due to the actions of a business or its employees. In Pennsylvania, commercial liability insurance may include the following forms of coverage:
General Liability Insurance - General liability insurance protects a business from common risks like client bodily injury or property damage. In Pennsylvania, this is one of the most popular forms of liability coverage provided to businesses
Business Owner’s Policy (BOP) - A BOP allows businesses to combine property, liability, and business income coverage into one bundle. This package is typically offered cheaper than if a business bought the three policies separately
Errors & Omissions (E&O) - An E&O coverage protects businesses from the financial losses caused by mistakes made by a business or its employees. The coverage pays for lawsuits and other financial penalties imposed on the business due to such errors
Employment Practices Liability Insurance (EPLI) - This is a specialized form of commercial liability insurance that offers coverage against litigations and financial fines caused by wrongful employment practices liability claims
Professional Liability Insurance - Professional liability insurance protects businesses from the consequences of negligence when the business’s core activity is providing professional services to clients. For example, businesses providing accounting, legal, and medical services need professional liability insurance. Professional liability insurance coverage provides coverage for commercial claims arising from business or professional negligence, malpractice, or misrepresentation. These are typically not included in general liability insurance. Professional liability insurance is used by businesses all over the state. For example, Pennsylvania ranks third in issued medical professional liability insurance and makes up around 7.4% of the total professional liability market in the U.S.
Product Liability Insurance - Product liability insurance protects damages caused by a defect in the product manufactured or sold by a business. For example, a hair product business can be sued by a client injured by the hair products offered. If such happens, product liability insurance can pay for the financial losses or lawsuit expenses
Employee Disability Insurance - Employee disability insurance ensures employees receive and continue to earn an income after a work injury that leads to a disability
Liquor Liability Insurance - Liquor liability insurance provides coverage to businesses that sell, serve or distribute alcoholic beverages. This insurance policy covers claims of bodily injuries or property damage caused by an intoxicated customer
Employee Benefits Liability - An employee benefits liability is insurance coverage that covers businesses from errors and omissions that occur when an employee benefit plan is being administered
Environmental Liability Insurance - This insurance covers the costs of cleaning up environmental damages and accidents done by a business. Environmental damages like land, water, and air pollution and biodiversity damages are covered by this policy
Cyber Liability Insurance - Businesses that handle sensitive customer information like credit card numbers, social security numbers, account numbers, addresses, health records, and driver's license data need cyber liability insurance. It provides coverage against data breaches or system hacks capable of divulging confidential customer information
A professional agent is best positioned to assess a business’s insurance needs. Business owners and representatives should work with licensed commercial insurance agents in Pennsylvania when looking to get suitable commercial liability insurance policies for their businesses.
COMMERCIAL HEALTH Insurance in Pennsylvania
Commercial health insurance in Pennsylvania is mandatory for businesses that have over 50 full-time employees. Commercial health insurance provided by employers extends coverage for about 57% of the insured persons in Pennsylvania. When business owners or representatives need to find a suitable commercial health insurance plan, it is best to work with a licensed commercial health insurance agent or broker.
In Pennsylvania, there are two primary forms of commercial health insurance, namely:
Individual Coverage Health Reimbursement Arrangement (ICHRA)
Group Health Insurance Plan
The table below compares ICHRA and group health insurance plans in Pennsylvania:
| ICHRA | Group Health Insurance | |
| Reimbursement Model | Employers can choose a contribution amount based on employee class and family size | Employers offer a pre-determined contribution amount to employees |
| Minimum participation | There is no minimum number of participants required under the ICHRA | There is a minimum participation required by a group health insurance plan |
| Employer contribution limits | There are no minimum or maximum contribution limits | There are no maximum contribution limits. However, employers must contribute 50% or more of the costs to be eligible for health care tax credits |
| Employer eligibility | Any employer with more than one employee is eligible for the ICHRA | Employers must have between 1-50 employees to qualify for the group health insurance plan |
| Employee eligibility | Can be offered to part-time, full-time, or seasonal employees who are eligible so long as they have the minimum coverage stipulated | Employers can determine the eligibility of employees under the group health insurance plan |
| Coverage flexibility | Employees can choose their health insurance plans so long as they can make the premium payments | Employees or employers can select plans if they provide stipulated minimum essential coverage |
| Enrollment Procedure | Businesses can enroll at any time of the year | Businesses can enroll in a group health insurance plan at any time of the year |
| Tax | ICHRA reimbursements are typically not taxed to employees | Group health insurance plans are generally not taxed to employees. However, for businesses to gain health care tax credits, they must contribute 50% or more of the premiums |
COMMERCIAL LIFE Insurance in Pennsylvania
Commercial life insurance protects businesses by insuring the life of employees and essential stakeholders of the business. In Pennsylvania, commercial life insurance includes three major forms of coverage:
Group life Insurance
A group life insurance, as the name implies, is an insurance policy that covers groups. In Pennsylvania, an employer or association is the policy owner, and all employees or members of the organization are the insured of the policy.
Buy-Sell Agreements
A buy-sell agreement is a contractual agreement between entities to buy out the business interest of a deceased or disabled member. In Pennsylvania, buy-sell agreements typically take two forms:
Cross-purchase agreements - Under this agreement, key employees take out policies on each other’s stake in the business, allowing for a smooth transition if any key employees become disabled or pass away
Stock-redemption agreements - Stock-redemption agreements are formal agreements between key employees and the business where the business agrees to purchase the business interest of a deceased or disabled key member.
Key Man Life Insurance
This policy offers coverage for businesses with key staff whose death or disability can potentially cripple their operations. The business pays the key man life insurance premiums and is also the beneficiary of the death benefit in case of the employee’s death.
To get life insurance in Pennsylvania, speak with a knowledgeable state-licensed life insurance agent.
BOP vs. CPP vs. GL
In Pennsylvania, the business owner policy (BOP) is offered as a bundled policy, unlike a commercial package policy (CPP) that has already been pre-defined by the insurer. General liability (GL) insurance provides coverage for recurring events that can expose a business to liabilities and lawsuits.
BUSINESS OWNER’S POLICY (BOP)
A business owner’s policy allows businesses to combine business property and business liability insurance into a single insurance policy. A BOP protects businesses from fires, thefts, and other disasters.
COMMERCIAL PACKAGE POLICY (CPP)
Commercial package policy, as the name implies, is offered as a “package” of policies. In Pennsylvania, a CPP allows a business to combine more than one commercial insurance coverage like:
Commercial property coverage
Commercial general liability coverage
Business crime coverage
Equipment breakdown coverage
Inland marine coverage
Commercial auto liability
GENERAL LIABILITY (GL) POLICY
Commercial general liability insurance in Pennsylvania offers coverage to businesses against liabilities and lawsuits arising from third-party injuries and property damages that may occur during business operations or in properties owned by a business.
How Much Business Insurance Coverage Do I Need?
In Pennsylvania, the amount of commercial insurance coverage needed by a business is generally determined by:
The types of business operations
The business's location within the Commonwealth and the likelihood of the natural disaster occurrence
The financial capacity of the business
State laws and prevailing policies
Considering these factors, it becomes clear that a business should only purchase adequate coverage to meet its needs. Purchasing not enough coverage can cause the business to needlessly drain its savings in case of damage or a lawsuit, while buying too much coverage is a waste of the business’ resources.
To get the right coverage to protect your business, discuss your coverage options with knowledgeable and Pennsylvania-licensed commercial insurance agents. The agent will be responsible for assessing the insurance needs and financial capacity of the business, reviewing state laws and selecting insurance coverage in compliance with the laws, submitting applications to insurers, and conducting follow-up sessions.
Surplus Lines Insurance in Pennsylvania
Surplus line insurance is a form of insurance that provides coverage to businesses for perils beyond the capacity or scope of traditional insurers. In Pennsylvania, surplus line insurers are under the oversight of the Pennsylvania Surplus Lines Association, a non-governmental organization that acts under contractual authority of the Pennsylvania Insurance Department (PID). Although authorized to operate in the Commonwealth, Surplus line insurers are not directly licensed by the Pennsylvania Insurance Department and are subject to minimal regulation. Consequently, if an insurance company becomes insolvent, the losses are not guaranteed by the Pennsylvania Property and Casualty Insurance Guaranty Association. In Pennsylvania, surplus line insurers must meet the following criteria before they become authorized to operate and offer insurance to the state's residents:
The surplus line insurer must be licensed to write the type of insurance in the jurisdiction where they are domiciled
The surplus line insurer must maintain a minimum capital base of $15 million or its monetary equivalent as stipulated by its domiciliary jurisdiction
The PID maintains a database of eligible surplus line insurers in the state. Business owners and representatives are encouraged to utilize this portal when searching for a surplus line insurer.
In Pennsylvania, surplus line insurance policies usually have the following distinguishing characteristics compared with standard insurers:
| Surplus Line Insurers | Standard Insurers |
| Surplus line insurers adopt a more Laissez-faire (tolerant) approach because of the need to increase client rapport | Although cordial with clients, they have a more strict method of operation |
| Insurance premiums cost more because of the hazard profile of risks covered | Insurance premiums cost less because only typical hazards are covered |
| Businesses can get surplus line insurance from within or outside the state | Standard insurers can only operate within the state for a policy to be valid in Pennsylvania |
| Must maintain a capital base of $15 million | Can maintain a varying capital base depending on the coverage offered to clients |
| Do not have an upper limit for claims. Claims amount is usually at the behest of clients | Maintain an upper limit for most claims categories |
What is an Example of Surplus Lines Insurance?
Surplus Line insurance covers risks that standard insurers will typically avoid and not offer coverage. For example, in 2006, David Beckham took out a $195 million insurance policy to provide coverage for his legs. Mariah Carey also took out an insurance policy valued at $35 million to provide coverage for her voice. Flood insurance from private insurers is usually offered as surplus lines insurance.
What Purpose Do Surplus Companies Serve in Pennsylvania?
In Pennsylvania, surplus line insurers have the singular task of providing coverage for risks that standard insurers cannot or do not want to carry. Businesses that cannot find a standard insurer to provide coverage for their unique needs can usually get such insurance policies from surplus line insurance companies. If the standard insurers turn your business away, your Pennsylvania-licensed commercial insurance agent can assist with finding reliable surplus line insurers that can offer the needed coverage, though usually at a higher cost.
Why Would Someone Place their Insurance with a Surplus Lines Broker?
Businesses in Pennsylvania place their insurance with a surplus line insurer if standard insurers cannot provide the coverage needed. Additionally, businesses can opt to use surplus line insurers since Pennsylvanian laws allow businesses to get insurance from foreign surplus line insurers domiciled anywhere within the country and formed under United States laws, or alien surplus line insurers domiciled outside the United States.
How are Surplus Lines Insurers Regulated in Pennsylvania?
In Pennsylvania, regulation of surplus line insurers is done by the Pennsylvania Surplus Lines Association. The organization is a non-governmental organization that provides oversight to the surplus line industry through contractual authority provided by the Pennsylvania Insurance Department. Surplus line insurers must be registered within the state of jurisdiction and must maintain a minimum capital base of $15 million.
To file a complaint about a surplus line insurer in the Commonwealth, use the Pennsylvania Consumer Services Online portal. Alternatively, businesses owners or their representatives can download an insurance complaint form and submit it by email, fax: (717) 787-8585, or mail to:
Pennsylvania Insurance Department
1209 Strawberry Square
Harrisburg, PA 17120
What is Specialty Business Insurance?
Specialty business insurers in Pennsylvania are responsible for providing coverage to businesses that the standard insurers do not offer in the Commonwealth. In Pennsylvania, specialty insurers provide the following services:
Garage Repair Shop Insurance - Due to the kind of business garage repair shops engage in, they are highly likely to face financial ruin from lawsuits or damaged equipment. Specialty insurance can provide coverage for such a business
Franchise Dealership Insurance - A franchised dealership often faces risks far beyond what standard insurers are willing to provide coverage. Specialty insurance can be of great help
Manufacturer Insurance - Manufacturing businesses are often exposed to risks of several hazards and can seek specialty insurance coverage to cater to their diverse needs
Auto body shops - Auto body shop business owners and employees often face severe hazards while on the job. Specialty insurance can be a way for auto body shop operators to gain coverage
Restaurant insurance - Operating a restaurant poses a unique set of risks to the business owner, chefs, and other staff. A specialty insurance policy may be needed to cater to these risks
Habitational exposure insurance - This specialty insurance provides liability coverage in the event of the bodily injury of a tenant and for other losses caused by storms, fire, theft, wind, vandalism by tenants, and malicious damage
Wholesaler and distributor insurance - This insurance policy combines commercial property insurance, business owners policy, business income insurance, and general liability into one policy package
Winery insurance - Wineries often face risks such as burnt vineyards, bad wine inputs, and theft of recipes. Specialty insurance can provide coverage against these risks
Veterinary office insurance - This specialty insurance option ensures that a vet doctor and clients are protected while engaging the services of the veterinary doctor. For example, pets that die due to mistakes might expose the vet to lawsuits; the veterinary office insurance package provides coverage against this
Landscaping services insurance - Landscaping insurance offers coverage to landscapers and lawn care specialists from several risks that may result in injury or property damage
Distillery insurance - Distillery insurance protects distillery owners, business operatives, and the liquor produced
If you need insurance for a Pennsylvania-based business, speak with a knowledgeable state-licensed commercial insurance agent who is familiar with your type of business. An experienced agent who represents multiple insurers can assess the business insurance needs and match them with several options of coverage for comparison.
What is Business Hazard Insurance in Pennsylvania?
A 2019 report from the National Fire Incident Reporting System indicated that fire incidents occurring in residential and non-residential buildings resulted in 89.3% of fire incident fatalities in Pennsylvania. Business hazard insurance, sometimes called business property insurance, provides coverage for the buildings where a business operates. In Pennsylvania, business hazard insurance covers property losses caused by:
Fires or smoke
Theft, vandalism, or malicious actions by clients and staff
Hail, Lightning, and thunderstorms
Explosions
Water leakage and seepage from water sprinklers
Building collapse
Broadly, business hazard insurance policies are grouped into two in Pennsylvania:
Commercial Property Insurance: This policy offers coverage for the property where a business operates. This policy also provides compensation for lost income
Business Owners Policy: This policy allows policyholders to combine the commercial property insurance policy and the general liability coverage policy into a single policy to protect their businesses against lawsuits and financial losses
It is always advisable for business owners and representatives to consult with a commercial insurance agent licensed in Pennsylvania while trying to purchase business hazard insurance in Pennsylvania. Agents typically help in the following ways:
Assessing the needs and financial standing of the business
Finding the best deals in the commercial insurance industry
Customizing insurance coverage that is sufficient enough to meet the needs of the business
Maintain the account and assist with future changes, when the business must adapt to the then-current needs
To protect your business and to get commercial insurance coverage in Pennsylvania, speak with a state-licensed insurance agent who represents multiple commercial insurance companies for comparison. Aim to compare at least three options.
