Most Common Business Insurance Claims (And How to Avoid Them)
By Insurance Advisor Team
Most Common Business Insurance Claims (And How to Avoid Them)

When it comes to business operations, unforeseen events such as natural disasters, accidents, and operational disruptions pose significant risks. To mitigate these risks, businesses invest in insurance policies designed to cover a wide range of potential liabilities and damages. Understanding the various types of insurance claims—from property damage and customer injuries to more specific concerns like product liability and reputational harm—is crucial for business owners. These insurance mechanisms provide vital financial protection and support, ensuring that businesses can continue to operate even in the face of significant challenges. 

However, navigating the complexities of business insurance claims requires more than just having a policy in place. It demands a deep understanding of what each type of insurance covers, the processes involved in filing claims, and the strategies for managing the aftermath effectively. Each claim type, such as those for auto accidents, workers’ compensation, or business interruption, presents unique challenges and necessitates specific responses. For businesses, the ability to manage these claims efficiently is not just about recovering losses but also about maintaining operational integrity and trust among customers, employees, and stakeholders.   

Common Business Insurance Claims  

Here are the most common business insurance claims and strategies to avoid them:  

Burglary and Theft:  

Burglary and theft are the most common business insurance claims, accounting for 54% of all claims. These incidents can involve theft by employees, customers, or outsiders and can result in significant financial losses. Burglary involves illegal entry into a building structure by forcible entry, using tools to break locks, or unauthorized access through deceit or bypassing security with the intent to commit a crime. Insurance claims for burglary cover loss of property and damage to the premises caused by forced entry. Theft, on the other hand, is the act of stealing property. It can occur with or without forcible entry — for example, an employee may commit theft without breaking and entering. Theft coverage in business property policies typically addresses the theft of property but may not cover all types of theft, such as employee theft, shoplifting or intellectual property theft, unless specifically stated. 

Prevention measures include:  

  • Implementing security systems that have central station monitoring.  
  • Adding video cameras to limited access areas and inventory storage 
  • Conducting regular audits and monitoring inventory levels.  
  • Investing in employee training and ethics programs.  
  • Creating a clean and organized workspace to reduce temptation.  

Water and Freezing Damage:   

Water damage caused by burst pipes due to freezing or flooding from rainstorms comes second in our list of most common insurance claims. Especially in regions with severe winter weather, such damage can lead to substantial financial losses due to the interruption of business operations and the cost of repairs. Water damage from burst pipes is specifically related to the freezing of plumbing and heating systems in cold weather, which can cause pipes to burst and result in significant water damage. This type of damage is particularly prevalent in unheated or poorly insulated buildings during cold seasons.  Note, flood is not covered under a business property policy, separate flood coverage must be purchased.  

Prevention measures include:  

  • Regularly inspecting and maintaining plumbing systems.  
  • Disconnecting and draining hoses during winter months.  
  • Turning water supply off 
  • Insulating exposed pipes and ensuring proper insulation.  
  • Keep the building heated to avoid frozen pipes 

Wind and Hail Damage:   

Wind and hail damage are common insurance claims, particularly for businesses with outdoor assets such as signage, awnings, or inventory. Companies are especially prone to severe weather events such as tornadoes, hurricanes, and thunderstorms in regions with regular stormy weather, like Florida’s hurricanes and tornado alley States. These natural elements can cause significant damage to buildings, vehicles, and other property, leading to costly repairs and potential disruptions to business operations.  

Wind damage can result from a variety of weather phenomena, such as high winds from thunderstorms or hurricanes that can tear off roof shingles, break windows, and topple trees onto buildings. Flying debris can also cause extensive secondary damage during windstorms. Hail damage often occurs during severe thunderstorms and can vary widely in severity. It can dent and break roofing materials, leading to leaks and water damage. It can also damage outdoor equipment, vehicles, and building facades.  

Prevention measures include:  

  • Move outdoor assets indoors when storms are looming.  
  • Securing loose items that could become projectiles in strong winds.  
  • Installing storm shutters or impact-resistant glass.  
  • Conducting regular roof inspections and maintenance.  

Fire Damage:   

Fires are a significant risk for businesses, particularly those with flammable materials or equipment. Fire damage is one of the most common and devastating risks, leading to extensive property damage, loss of business assets, and significant interruption of business operations. Fire can affect a business in various ways. The most direct impact of a fire is the damage to the building itself. This includes compromised structural integrity resulting from fires. Fire also often destroys or severely damages the contents within the building, including furniture, equipment, inventory, and personal belongings. Even in areas not directly touched by flames, smoke can permeate and cause extensive damage to both the structure and contents, often requiring specialized cleaning to restore interiors. An often-overlooked facet in fire control is the efforts to extinguish the fire, whether by sprinkler systems or firefighting by personnel. These means of fighting fire can also lead to water damage or contamination by chemicals.  

Prevention measures include:  

  • Central station monitored fire alarm system installation. 
  • Conducting regular fire safety inspections and maintenance.  
  • Ensuring proper storage and disposal of flammable materials.  
  • Implementing fire suppression systems and emergency response plans.  
  • Providing employee training on fire safety and emergency procedures.  

Customer Injury and Property Damage:   

Customer injury and property damage claims are common, particularly in retail and service-based industries. These claims are critical aspects of business insurance that protect companies from financial losses when accidents occur on their premises or because of their operations. These types of claims fall under what is generally known as "liability insurance."  

Customer injury refers to any physical harm that a customer sustains while on your business premises or due to your business activities. Common causes include slips and falls, injuries from products, or accidents that occur within the business environment. A property damage claim involves damage to property owned by third parties (including customers) that is caused directly or indirectly by the business. This could be damage caused by the business’s operations, installations, products, or services that damage another’s property.  

Prevention measures include:  

  • Maintaining a clean and organized business to reduce tripping hazards.  
  • Using hazard signs, like “Wet Floor” 
  • Providing adequate lighting and signage.  
  • Implementing safety protocols for customer interactions.  
  • Conducting regular inspections and maintenance of equipment and facilities.  

Product Liability:   

Product liability claims arise when a customer suffers from an injury or illness relating to use of an insured product. Product liability claims are a significant exposure of general liability insurance, addressing issues when a product causes injury or damage. Product Liability involves holding a business responsible for damage or injuries caused by its products. Product liability claims involve compensation for flaws in a product’s design that make it inherently unsafe. Also, errors can occur during the production process, even if the product’s design is safe. Inadequate instructions, failure to warn consumers of potential risks, or improper labeling can also factor in when harm is caused to customers.   

Prevention measures include:  

  • Implementing rigorous quality control and testing processes.  
  • Ensuring compliance with industry standards and regulations.  
  • Providing clear product instructions and warnings.  
  • Maintaining accurate records of product development and testing.  

Reputational Harm:   

Reputational harm claims can arise from negative publicity, social media controversies, or product recalls. These claims in business insurance address situations where a business suffers financial losses due to damage to its reputation. Reputational harm involves damage to a business’s standing or goodwill that results in financial loss. This can occur through false statements made by someone else that cause harm to the business's reputation. In today's age of high competition, incorrect information spreads like a virus. It affects the business or its products/services in multiple ways that can be catastrophic. Also, incidents where private business, customer, or employee information is leaked, can cause a loss of trust in the business, leading to a visible decline in sales. Such public perception also can be compounded when claims of unethical practices, whether true or false, affect the business. This is a specialized type of coverage not included in your basic property, general liability, business auto or workers compensation policies.   

Prevention measures include:  

  • Maintaining a positive company culture and reputation.  
  • Implementing crisis management and communication strategies.  
  • Conducting regular employee training in ethics and professionalism.  
  • Ensuring transparency in business practices and operations.  

Auto Accidents:   

Auto accidents are common insurance claims, particularly for businesses that own vehicles. Such vehicles include a fleet of delivery vehicles, company cars for employee use, or any other automotive assets. Properly managing these claims is vital to minimize financial impacts and ensure continuous business operations. Auto accident claims typically involve damage to the business vehicle itself, but the larger claims are for bodily injury to people harmed by the at fault driver’s actions. Liability claims arise from third parties for injuries or property damage caused by the business vehicle’s driver. Many of these claims include costs associated with injuries to drivers and passengers in the vehicle that was not negligent for the accident. 

Prevention measures include:  

  • Ensuring proper vehicle maintenance and inspections.  
  • Pre-hire motor vehicle reports on each applicant 
  • Implementing safe driving practices and policies.  
  • Conducting regular driver training and evaluations.  
  • Maintaining adequate auto insurance coverage.  

Workers' Compensation:   

Workers' compensation claims constitute a major aspect of business insurance claims. Workers’ compensation coverage is statutory, meaning the coverage it provides is mandated by each state’s laws. It is designed to provide financial protection and medical care for employees injured while working or those who suffer from an occupational disease as a direct result of their job. Workers' compensation insurance covers costs for medical treatment directly related to work injury. It provides lost wage compensation for a portion (66 2/3%) of the income the employee loses while they are unable to work. It helps with expenses for assisting the injured employee to regain skills or retrain for another position if they cannot return to their previous job. In case of death on the job, death benefits can financially assist the dependents of an employee who dies from a work-related injury or illness.   

Prevention measures include:  

  • Implementing robust safety protocols and training programs.  
  • Conducting regular workplace safety audits and inspections.  
  • Ensuring compliance with OSHA (Occupational Safety and Health Administration regulations).  
  • Providing adequate personal protective equipment 

Business Interruption:   

Business interruption claims arise when normal business operations suffer disruption due to damage to the insured’s building by a covered peril.  The building must suffer direct damage from fire, wind, or other covered perils which forces the business to close because normal operations are impossible. This coverage provides a replacement revenue stream while the business is inoperable providing support to help the businesses meet its ongoing financial obligations. 

Coverage typically includes compensation based on previous financial records. These records on revenues help in estimating how much the business would have earned had the disruption not occurred. These claims also help with operating expenses such as rent and utilities, even though the business is temporarily inactive. If extra expense coverage is purchased, some companies continue to operate from a temporary location if the primary premises are unusable, therefore mitigating the loss of revenue suffered. Extra expense coverage helps with expenses associated with moving to and operating from such a location. Other additional costs like expediting delivery of new equipment are also covered to enable the business to continue operations during the recovery phase.   

Prevention measures include:  

  • Implementing business continuity and disaster recovery plans.  
  • Conducting regular risk assessments and emergency preparedness drills.  
  • Maintaining adequate limits for business interruption.  
  • Ensuring compliance with industry regulations and standards.  


The various business insurance claims, from property losses, third party liability, employee injuries, and business interruptions, reveal to us the vital role of appropriate insurance coverage in a business’s recovery and resilience. Each type of claim, whether it involves direct physical damage, legal liabilities, or operational disruptions, carries its unique complexities and requires meticulous management. This not only ensures swift recovery from adverse events but also supports long-term business sustainability and compliance with regulatory standards. Effective handling of these claims also involves a proactive approach: implementing preventive measures, maintaining thorough documentation, and understanding the nuances of insurance policies.  

Ultimately, the key to managing business insurance claims effectively lies in preparedness and partnership. Businesses must be equipped with robust risk management strategies and work closely with insurance professionals to tailor their coverage to meet specific needs and potential vulnerabilities. Regular reviews and updates of insurance policies, combined with ongoing employee training and safety audits, form the backbone of a responsive and resilient risk management program. By investing in the right insurance from, you can cultivate a culture of preparedness for your business to navigate through crises with confidence, ensuring minimal disruption and safeguarding your future. 

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