Small businesses need the right types of insurance to protect assets against damage and legal claims. That said, many business owners are uncertain of what they need when it comes to their coverage, as the process can be confusing and, often, overwhelming.
It’s important to remember that every business has its own individual needs — based on industry, focus, location, etc. While most business owners hope they’ll never have to rely on insurance, the truth is, it’s a very essential investment. In fact, it is one that can make the difference between closing up shop and a healthy business longevity.
No company wants to be underinsured, but then again, it’s not advantageous to over pay. Let’s look at top options that can help protect small businesses:
Every employer needs to realize the importance of workers’ compensation insurance — in fact, it has been required in most states since it was instituted more than 100 years ago as part of a ‘grand bargain’ between employers and employees. Workers’ compensation coverage exists to serve as employees’ ‘exclusive remedy’ for work related injuries or illnesses. In exchange for this guarantee of coverage, employees waive their right to sue employers over workplace injuries. Workers’ compensation coverage pays for medical expenses incurred as a result of a work related injury as well as a portion of the injured workers’ wages during the recovery period. Today, to be a competitive employer, it is also important that the right workers’ compensation carrier is selected who can expedite claims, provide prompt service and access to care in order to help injured workers return to work as soon as it is safe to do so.
There are several immediate as well as hidden costs associated with employee injuries, which are discussed in another blog. The best approach possible of course, is preventing accidents from occurring in the first place. Many workers’ compensation carriers have risk management resources available to help small businesses implement best practices to help prevent workplace injuries. Ask your agent for more details.
Liability coverage protects a company when a third-party makes a claim for property damage or injury resulting from a company’s premises, operations or products. This coverage is often bundled with other coverages, such as property insurance into a business owners’ policy (BOP) or Package policy.
Let’s look at a few key liability coverages a business should consider:
1. General Liability
This is a broad liability policy that provides three distinct types of liability coverage. The first coverage offers legal liability protection in the event of a third party claim or lawsuit alleging bodily injury or property damage as a result of a condition at the business premises or as a result of an action or inaction by the business or one of its employees. The second coverage type provides liability coverage in the event the business is sued for personal or advertising injury, such as libel, slander or infringing on copyrights, to name a few examples. The third type of coverage covers medical payments that are incurred by a non-employee as a result of an accident at the business’s premise. Medpay coverage does not require a finding of fault by the business and can allow for quick resolution of smaller bodily injury claims. Other types of liability coverage, such as professional liability or products liability need to be purchased separately and are not typically included in a standard GL policy.
2. Professional Liability
Many know of this as malpractice insurance or errors and omissions coverage. Doctors, accountants and attorneys need this coverage, as well as any business owner that could face professional negligence charges.
3. Product Liability
If you manufacture a product, then you could be held liable for any bodily injury or property damage that results from a product’s failure or from inadequate warnings or instructions. This coverage can also protect food product manufacturers against the risk of food poisoning or other health related outbreaks. Many property coverage forms offer some coverage to help the business recall damaged or tainted products in order to help reduce the risk of damage or injury to consumers.
4. Automobile Liability
Automobile liability coverage provides liability coverage for property damage and injuries arising out of the use or maintenance of a business’s motor vehicles. This coverage is part of a commercial automobile policy, as it is not included in a general liability policy.
This is a versatile coverage form that is tailored to meet your property insurance needs. Depending on the cause of loss form used to craft your policy, different perils may be covered. The most common types of perils which are covered in the broad form are:
Property insurance can help you protect the following:
- The building (if you own it)
- enhancements and/or equipment permanently installed in the building
- outdoor property that is located on the premises
- Contents within the building, including inventory; also known as ‘business personal property’
- Finished & unfinished goods (if you are a manufacturer)
- Boiler & Machinery coverage to provide coverage in the event of a breakdown or failure of heavy equipment such as boilers, refrigerators, or heating and cooling systems, etc.
- Property while it is in transit or away from the premises (may require special coverage)
This is not an exhaustive list! If you have special property, equipment or goods that need to be covered, do not assume that it is. Speak with your agent to ensure you have the coverage you need in place.
Employment Practices Liability Insurance (EPLI), is a special coverage designed to protect a business and its management personnel in the event it is sued for wrongful termination, discrimination, harassment, hostile work environment, invasion of privacy, breach of contract, emotional distress, or wage and hour violations. These exposures are typically excluded under a standard general liability form, which is why separate coverage is necessary. Coverage can commonly be added as part of a Businessowners (BOP) or Package policy and multiple limit options are usually available.
Depending on the size of your business, you will be required to comply with some or all of these federal laws that deal with employment practices:
- The Civil Rights Act of 1964
- The Americans with Disabilities Act of 1990
- The Age Discrimination in Employment Act of 1967
- The Family and Medical Leave Act
For more information about these laws and applicability to small or mid-size businesses, visit the Equal Employment Opportunity Commission website.
The term Cyber Liability coverage is often used to describe two distinct type of coverages which are:
Data/Privacy Breach coverage, which provides coverage for damages or costs incurred by the insured to investigate and remediate the breach. This type of coverage is commonly referred to as first party cyber coverage.
Cyber Liability coverage provides liability coverage in the event a business is sued by a third party because of damages they incurred from a data or privacy breach event that the business experienced.
These coverages are often presented jointly, but not always, so it is important to understand what you are purchasing. Like EPLI, these coverages often can be added to a BOP or Package policy and have multiple limit options. Businesses that tend to house highly sensitive data such as health information records should consider purchasing coverage through a standalone policy by an insurance provider that specializes in that coverage or industry.
Acadia offers its products through a network of independent insurance agents located across the Northeast. For more information about our products or to find an agent near you, visit acadiainsurance.com
Acadia is pleased to share this material for the benefit of its customers. Please note, however, that nothing herein should be construed as either legal advice or the provision of professional consulting services. This material is for informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.