Your guide to business insurance in Texas

June 17, 2020

Learn how to protect your business with our guide to business insurance in Texas

Two men in a repair shop looking at a business insurance plan on a tablet.

Running a business is a lot of work. Marketing, sales, employees - there's so much to manage, and so many places where unexpected incidents can take place. That's where business insurance comes into play! But what is involved in a business insurance policy? We'll cover it all in our guide to business insurance in Texas, so read on!

How does business insurance work in Texas?

Business insurance is different than other types of insurance because it's a fairly broad term that applies to a wide range of coverages and policies, such as business property, business liability, business auto, and so on.

Many insurance companies will combine certain coverages into a single policy called a Businessowners Policy (BOP). This usually includes property and liability and may include additional options, such as business interruption. 

All of this depends on several factors, namely the insurance company, but also the size of your business and your individual needs. In the following sections, we'll look at each aspect individually.

Business property policies

First, we'll look at business property insurance. These types of policies and coverages protect your business by covering its assets, whether it be your place of business or your business vehicles.

Insurance for your business's building and assets

One of the most important aspects of many businesses is the building it operates out of. Whether it's a retail store, a restaurant, or office space, losing the ability to work in your place of business can be devastating and costly.

While covered losses will certainly vary between insurance companies, they are typically broken down into one of these three levels.

Basic form policies. This is your most basic type of business coverage. They usually cover damage from your standard hazards, such as fire, wind/weather, vandalism, leaks, vehicle collisions, riots and civil unrest. 

Broad form policies. In addition to the events covered in the basic form policy, this expands coverage to include building collapse, falling objects, and damage caused by the weight of ice and snow.

Special form policies. This is the most expansive form of coverage, and covers all causes of loss except specifically listed items called, which are generally referred to as "exclusions." Exclusions might include floods, earthquakes, war, nuclear disaster, and normal wear and tear.

Business auto insurance

Personal auto insurance usually ceases coverage when you are driving your vehicle for the purpose of work, or if the vehicle is used primarily for business. In circumstances such as this, it's important for the business to have its own business auto insurance policy.

A business auto insurance policy operates in a very similar fashion to a personal auto policy. It includes coverage for property damage, bodily injury, and liability. This is especially important if your business regularly relies on several vehicles, or a fleet of vehicles, for normal business operations.

Like personal auto insurance in Texas, businesses that rely on vehicles are required to carry an auto insurance policy. This applies not only to vehicles used for the transportation of products, but those used to traveling to meetings and other business-related events.

Additional property policy options

Machinery coverage. Certain types of machinery, such as boilers, air conditioning units, and water heaters, may require additional coverage beyond that of your commercial property insurance.

Flood insurance. Like homeowners insurance, flood insurance for businesses is usually sold separately, typically through the National Flood Insurance Program.

Wind and hail for coastal areas. Like flood insurance, many insurance companies won't cover windstorms and hail in certain coastal areas. Instead, you can get coverage for your business through The Texas Windstorm Insurance Association.

While both flood and windstorm insurance are provided through government organizations, your insurance agent can typically still help you get coverage.

Business operations policies

Next, we'll look at policy options that cover elements central to the operation of your business.

General liability

Liability insurance is important to have as a homeowner or as a driver, but it's also incredibly important to have as a business owner. In addition to more standard risks, business owners face a variety of unique risks, some specific to their industry.

Not only does a general commercial liability policy protect the business owner from bodily injury claims and property damage claims, it can protect against claims of slander and false advertising.

Premises/operations coverage. This covers damages or injuries that occur on your premises, or place of business, while in the process of your normal business operations.

Products/completed operations. As opposed to premises coverage, this covers damages or bodily injury that takes place away from your business premises, but still caused by your products or work.

The list of circumstances that you, as a business owner, could potentially be liable for can be long and is partially determined by the type of business you own. As such, it's very important that you speak to your insurance agent regarding your specific business and understand exactly what your liability policy covers and what exclusions may exist.

Business interruption

When a disaster causes your business to close, its income is likely to take a hit. In fact, many businesses aren't actually able to reopen after a disaster. Business interruption covers that loss of income, and can even pay to allow your business to operate from a temporary location.

According to the Texas Department of Insurance, "business interruption insurance generally covers financial losses that occur when a company can no longer do business due to a direct physical loss of or damage to its property by a peril covered by the policy."

This means that most business interruption policies are going to pay out after something like a fire, tornado, vandalism, or riots. However, that also means that many do not cover closure and loss of income due to viruses, pandemics, or possibly data breaches and cyber attacks.

Cyber liability and data breach insurance

As the business world moves increasingly towards digital platforms and data storage, it becomes imperative that businesses take the associated risks into account. While cybercriminals and hackers can and do target large corporations, small businesses are often targets, too. All it takes to compromise your business's data is a simple email phishing attack.  If your business's data is compromised, not only can that impact your daily operations, it can potentially put sensitive customer data at risk.

General commercial liability most likely will not cover the costs associated with a data breach. If your business is unable to operate because of a data breach or cyber attack, business interruption insurance won't likely cover that either.

In general, cyber liability and data breach insurance are designed to help cover the losses that come with compromised data. Policies may help pay for the damage that results from a customer's data being stolen or lost, but can also help pay for investigations, data recovery, loss of income, and even PR strategies to help recover your reputation with customers.

As always, the specific coverages will vary based on your policy and insurance company.

Workers compensation insurance

If your business has employees, you know that they are an essential part of daily operations. Workers compensation insurance is a way for an employer to protect its employees in the event that they are injured by a work-related hazard. It has three main types of benefits: medical benefits, income benefits, and death benefits.

While most states have some sort of requirement for workers compensation insurance, Texas does not. However, businesses that choose not to carry some coverage may be open to lawsuits by employees who are injured in the line of work, and may lose certain defenses used in many personal injury lawsuits.

What determines my business insurance premium?

Claims history. Just like auto and homeowners insurance, having a history of claims in the past can cause insurance companies to raise rates.

Deductible level. Like many other types of insurance, you can often choose to lower your premium by electing to have a higher deductible. In other words, if you choose to pay more out of pocket up front, you can usually get a lower rate.

Number of employees. The more people you have working for you, the greater the chances of a claim occurring are. Typically, your policy's premium will raise with the number of employees you have.

Your sales and/or revenue. The amount of money your business makes in a given year can also have an impact on your business insurance premiums.

The type of business you have or the industry you're in. Certain industries naturally take on greater risks. If you own an internet company where all of your employees work at a desk, your premiums are likely to be lower than if you owned a roofing company or a construction company.

The location of your business. Like homeowners insurance, the location of your business can have an effect on your premiums as well. Businesses located in major cities, such as Houston, are likely to have greater risks to property than a small town, like Round Rock.

Your various policy limits. Finally (and perhaps most obviously) one of the largest factors when determining your premium is going to be the amount of coverage you have. A $1,000,000 liability policy is going to cost significantly less than a $10,000,000 policy.

As you can see, there are a wide variety of policies included beneath the banner of business insurance. Because there are so many elements, and because every business has different needs, it is crucial that business owners work carefully with their insurance agent to make sure they don't have too much or too little coverage.

A woman standing in front of her small business with her arms crossed.

You've worked hard to build your business. Request a free quote and learn how Germania can help you protect it!

Read more: More and more businesses are finding ways for their employees to work remotely, but it can be challenging to stay productive. Check out these tips for doing your best work from home!

by Geoff Ullrich

About the Author

Geoff Ullrich is a writer and Content Marketing Specialist at Germania Insurance.