Businesses need insurance, more so than individuals! This is because there are many risks businesses face that can be financially devastating. The two primary risks are Catastrophic events and Legal liability.
It is therefore not surprising that the three most common business insurance claims and therefore cover requirements to seriously consider, are: 1) Business Interruption, 2) Third-party liability, 3) Property damage.
Here are explanations of the main types of business insurance cover, as well as alternate names used to describe the same type of insurance.
This type of insurance goes by many names and sub-categories. Do not be confused by them...
Liability Insurance, also known as third-party liability insurance, public liability cover or legal liability cover because it protects businesses from legal liability and damages arising from a lawsuit against the business...
This category can be split into General liability and Professional liability. Every business needs liability insurance to cover defense and damages if you, your staff or your products and business services cause injury, damage or death to a third-party individual or property.
Professional liability insurance also known as Errors and Omissions Insurance or professional indemnity insurance, is very important for professionals such as lawyers, accountants, real estate agents, architects, quantity surveyors to name only a few, and other businesses that assist in dispensing advice to clients. This cover helps protect those who provide professional advice and services, in the even that there is litigation arising from bad advice or mistakes.
This cover is not part of general liability insurance
Companies that manufacture goods can also take out product liability cover to protect against the risks mentioned above.
This is also known as loss of earnings insurance. With natural disasters on the increase globally, as well the ever present possibility of unanticipated catastrophes such as fires - business interruption can be financially devastating to any business. Therefore this insurance is a must to protect businesses from loss of profits or damage to business property.
Key factors to consider when taking out Business interruption cover is:
This type of insurance must be carefully managed with the help of expert brokers or insurers that can guide you through the exact nature of your particular business.
Standard Business Interruption cover may need to be supplemented with additional cover to mitigate other risks.
As an example you could extend this cover to include one of your key suppliers. If they are affected by a natural disaster such as a flood and your business experiences a loss of revenue you could claim this for this loss incurred.
Also if public utilities such as prolonged electricity outages occur, having additional coverage for these events can also safeguard loss of business revenue.
Make sure you are covered for specific disasters or perils that is listed on your overall business policy.
Property and physical assets owned by a business likely form the most valuable assets of any business. These assets include buildings, stock, machinery, computer equipment and other physical assets that are an integral part of the revenue generating activities of an enterprise.
Fire, floods, storms and theft are just some of the catastrophes and perils that can cause loss or damage. Not all perils are covered under standard property insurance policies.
Business tools and items of value that is portable and regularly taken away from the business premises such as plumbing equipment should be specified and insured under an All-risks business policy
Business insurance can be costly so a balanced approach is needed when determining coverage requirements. The above are considered to be the bare minimum coverage requirements.
The main point is that you will need to assess the exact nature of risks your business faces and decide the best way to mitigate (insure) these risks away.
Business insurance almost always requires the services of an expert intermediary or broker who understands the risks your business faces. These intermediaries will underwrite the risks of your business from the simple business with standard coverage based on common risks, to the complex enterprises that require bespoke to complex cover e.g. marine or construction companies.
Insist on face to face meetings with your business insurer so that they can explain options clearly and help you determine cover gaps that may adversely affect you.
Many insurers, particular direct insurers provide packaged business cover solutions by trade, e.g. Professionals, Tradesmen, Office, Medical - these should be considered on coverage and affordability.
Business continuity is the ultimate goal of any entrepreneur or owner, therefore be sure to have a risk management strategy in place to mitigate loss.