Amidst the challenges and pressures of running a business, the adequacy of your business’s insurance coverage is easy to overlook. The crucial question as to whether your business is properly protected is too often answered after a business suffers a loss or is sued. At this point, it is too late to fix any deficiencies in your business’s insurance policies. Decisions made today concerning your insurance needs could very well be the difference between having security against catastrophic losses and judgments versus having to pay for such losses out of your own pocket.
To properly evaluate insurance coverage, you must first determine the types of insurance protection that your business will require. Some of the most common types of insurance for businesses include:
– Commercial General Liability
– Commercial Auto
– Business Interruption
– Workers Compensation
– Director and Officer Liability
The various types of insurance can be confusing and difficult to understand. A business’s insurance needs will vary, depending on the nature of your business. However, generally, in deciding what type of insurance you need, you should consider the following:
– The type of items you are seeking to protect
(equipment,inventory, vehicles, buildings, etc.)
– What do you want to be protected from
(law suits, fire, theft, loss of business income, etc.)
– Who would you like to be protected
(Officers and Directors, full-time/part-time employees etc.)
Another key to protecting your business is purchasing policies with sufficient levels of insurance limits. Your insurance premium will be calculated, in part, based on the policy’s limits. Your attorney or agent should be able to assist you in deciding how much insurance your business should have.
You must also determine whether your policies contain any exclusions or endorsements (an alteration to your policy that may restrict or decrease your level of coverage) that will bar types of losses that you are trying to insure against. It is not uncommon for a business to submit a claim to its insurance carrier only to have the claim denied as a result of an exclusion. Having gaps in your insurance coverage can be catastrophic and sometimes even fatal for a business. Therefore, you should make sure you understand the various exclusions and conditions that will be included in the policy. In the event that you already have insurance policies in place for your business, you should provide copies of the policies to your attorney to determine whether your existing coverage is offering you adequate protection.
Risk management is a crucial component to running a business that is often overlooked. The failure to obtain adequate insurance could expose your business to unnecessary risks and even place your business in severe jeopardy. However, with the proper insurance coverage, you can operate your business with the peace of mind of knowing that your business is protected from unforeseen accidents and losses.