Basic Business Insurance Policy Obligations

Business insurance policies are detailed contracts that inform the insured business what will be covered, as well as the rules they must follow. Like the insured, the insurer also has a set of obligations they must follow when claims are filed. The insurance policy should be treated as a contract; a legal document that ensures both parties will follow state laws and abide by their responsibilities and basic business insurance policy obligations.

Insured Obligations

As the insured business owner, you are responsible for a variety of things in order to abide by your insurance contract. You must follow all the guidelines and fill your obligations, per your contract. This includes only submitting honest claims, submitting them on time, and cooperating fully.

  • Report every and all claims. All claims must be reported immediately after the event occurs, even if you don’t think it will lead to a lawsuit. Waiting until a lawsuit has been filed is against the insurance contract, and only leads to bigger problems later on. The insurance company needs to know immediately so that they could do their part in offering your business the coverage it needs.
  • Be honest. Honesty is key when dealing with your insurance company, filing claims, and filling your obligations as the insured. You must file claims with documents that are 100% accurate, and avoid inflating the value of what you lost during the event. As per your contract, false claims are a felony, and dishonesty isn’t going to get you very far.
  • Cooperate in claims investigations. Even after reporting your claim to the insurance company, you are still obligated to follow through with the investigations. Reporting the claim and walking away from it isn’t going to help you. As a business owner, you will have more success if you cooperate with the claims investigator and get as involved as possible in the investigation. The insurer can deny your claim if you don’t become involved, and cooperate as you are expected to.

Insurer Obligations

The insurer also has their own obligations in regards to the insurance policy and related insurance contracts. They must follow the laws as they are set forward by the state, and respond to claims filed in an efficient manner.

  • Follow all state laws. The insurer is obligated to follow all of the state laws and regulations that relate to the insured case and the type of claim filed. Rules and regulations are requirements of insurers, including the state’s consumer laws.
  • Defend insured business in case of claim. Whether or not the insurer feels that the claim filed is covered, the insurer must defend the business in regards to the claim. If a claim was filed by the insured business that may lead to an invoked coverage, the insurer is required to follow through and defend the business. If the insurer does not believe payment is valid for the claim, they must still defend, but cannot cover the costs.
  • Pay for damage or loss on covered claims. The insurer is also obligated to pay for loss or damages that were covered as detailed on the business insurance policy. As long as the claim filed is covered under the policy, they are required to pay.


State laws are put in place to ensure the insurer and the insured are following the laws set forth in regards to claims filed, defending claims, and paying for claims that are covered. The insured business and the insurance company must follow their basic business insurance policy obligations.