Running a business involves countless responsibilities, and while success is always the goal, risks are an inevitable part of the journey. To protect a company’s future, having the right insurance coverage is non-negotiable. However, not all policies are equal, and overlooking critical coverage areas could lead to financial and operational setbacks.

This article dives into the essential insurance coverages every business should evaluate to ensure robust protection.

1. General Liability Insurance

This is the cornerstone of business insurance, covering third-party claims of bodily injury, property damage, and personal injury. Whether you’re running a storefront, managing a client-facing office, or operating online, this coverage offers peace of mind against legal and financial liabilities.

Key Considerations:

•    Ensure adequate coverage limits to handle potential lawsuits.
•    Identify available coverage extensions that will address specific liability risk exposures with customers and third parties borne by the business operation.
•    Check for exclusions that might leave your business exposed.

2. Property Insurance

Your office, warehouse, equipment, and inventory are the lifeblood of your operations. Property insurance protects these physical assets from risks like fire, theft, vandalism, or natural disasters.

Key Considerations:

•    Verify and evaluate the basis of valuation of the properties subject for insurance.
•    Review the replacement cost vs. actual cash value coverage.
•    Verify coverage for specific risks, such as floods or earthquakes, which may require separate policies.

3. Business Interruption Insurance

What happens if your operations are forced to halt due to a fire or other covered event? Business interruption insurance steps in to cover lost income and ongoing expenses, such as rent or payroll.

Key Considerations:

•    Assess the policy’s limits and duration of coverage.
•    Confirm that all potential revenue streams are covered.
•    Check and review your risk appetite to retain risk in relation with the potential maximum indemnity period.

4. Cyber Liability Insurance

In today’s digital-first world, cyberattacks are a growing threat. Cyber liability insurance helps cover the costs of data breaches, ransomware attacks, and even regulatory penalties.

Key Considerations:

•    Evaluate first-party and third-party coverage.
•    Check for coverage of regulatory fines and penalties.

5. Professional Liability Insurance

If your business offers services or advice, this policy (also known as Errors & Omissions insurance) is essential. It protects against claims of negligence, errors, or omissions that lead to financial losses for your clients.

Key Considerations:

•    Tailor coverage to your industry-specific risks.
•    Evaluate extent of liability exposure relative to your industry and professional services you offer to your clients.
•    Verify retroactive and extended reporting periods in the policy.

6. Directors and Officers (D&O) Liability Insurance

For companies with a leadership team, D&O insurance is a must. It protects directors and officers from personal liability for decisions made on behalf of the company.

Key Considerations:

•    Review exclusions for fraud or criminal acts.
•    Ensure coverage extends to past, present, and future directors.

7. Product Liability Insurance

If your business manufactures or sells products, this coverage protects against claims of injury or damage caused by defective products.

Key Considerations:

•    Verify coverage for all stages of the product lifecycle.
•    Review geographic limitations if selling internationally.

Conclusion

Insurance is not a one-size-fits-all solution. Regularly reviewing your policy with a trusted advisor can help identify gaps and ensure your business has comprehensive protection. By investing in the right coverages, companies can not only mitigate risks but also gain the confidence to thrive in an uncertain world.

References

•    https://www.forbes.com/sites/adp/2017/01/13/what-types-of-insurance-should-small-business-explore/
•    https://www.iii.org/publications/insurance-handbook/insurance-basics/small-business-insurance-basics
•    https://www.forbes.com/councils/forbesbusinessdevelopmentcouncil/2023/06/30/3-insurance-coverages-every-small-business-owner-needs-to-know-about/