A primary goal of new business owners is to keep operating costs low. At launch, they may not have a tremendous amount of risk or liability, and will only purchase the necessary insurance such as Commercial General Liability coverage and Workers' Compensation. Over time, as the company grows in size, profits and liability, many business owners don't take the time to reexamine their policies to ensure they have adequate insurance coverage.
Why Your Basic Coverage Might Not Be Enough
Typically, with Commercial General Liability policies, four types of claims are covered:
- bodily injury;
- property damage or loss;
- personal injury, such as libel or slander;
- advertising injury.
While commercial liability insurance is fairly inexpensive, costs for defending a claim are not. This is where General Liability comes in. This will cover all damages, legal fees and settlement charges up to the policy limits. General Liability is often packaged with Property coverage in a Business Owner's Policy (BOP).
BOPs are designed specifically for small- to mid-sized businesses that are classified as low-risk. It should include physical assets, such as office furniture and computers, and, in some cases it will cover loss of business income.
Talk to Your Broker to Update Your Coverage
It's important for business owners to periodically review their policy with their broker - particularly when the company experiences significant change or growth - this will ensure that the company is armed with the right amount of protection. Additionally, as the business climate becomes increasingly complex, so do the insurance needs of business owners.
Cover Your Bases
In many cases, businesses have taken the proper steps to insure against property loss and injury claims - the more traditional forms of commercial insurance coverage - but may have overlooked protecting themselves against claims of negligence. Errors and Omissions (E&O) insurance, also known as Professional Liability insurance, protects organizations or individuals against claims of professional negligence throughout a variety of professional services.
Businesses dealing with global vendors will also want to consider an additional type of coverage: vendor insurance. In fact, some foreign companies will not even do business with a company outside of their country if they do not have this coverage.
Best Ways to Upgrade Your Small Business Insurance
Business owners can easily bolster their protection by increasing their Commercial General Liability coverage or by adding supplemental insurance to their existing Commercial Liability insurance policy. Types of supplemental insurance include:
- Auto/fleet insurance: Provides coverage for injury, damage or theft on company-owned vehicles, as well as for employees who may be involved in an accident while driving a personal car on company business.
- Business interruption insurance: Replaces normal business income when insured losses negatively impact a business's bottom line. In other words, it reimburses a company for lost income until the company is able to resume full operations.
- Third Party Fidelity/employee dishonesty insurance: Covers the cost of losses if an employee steals money, equipment or other assets from the business owner or one of the business's clients.
- Umbrella insurance: Provides additional coverage when a claim exceeds the limits of an underlying insurance policy.
Be wary of adding too much supplemental or umbrella insurance coverage; costs can begin to add up. Business owners should spend some time researching ways to lower their premiums. Often this can be done with a few simple steps, including, keeping duplicate records off-site; installing an alarm system; and researching the number of claims brought against companies operating within the same industry. If there are very few lawsuits, the business owner should present this information to their broker.
Risks and needs for coverage will vary. There isn't a one-size-fits-all when it comes to Commercial Liability insurance policies. It's important for business owners to make it a point to discuss their coverage with their brokers, and usually a good time to do this is when the policy is up for renewal.