6 Key Insights Every Business Owner Should Consider Before Investing in a General Insurance Policy

As a business owner, you must always be prepared for the unexpected. This means having a sound general insurance policy that will cover any unforeseen accidents, incidents or disasters which could cause financial ruin. The purpose of this article is to help you get a better understanding of what to look for and how to choose a policy that will meet your company’s needs. In this article, we will discuss six key insights that you should consider before investing in a general insurance policy.

1. Know Your Risks

The first step in determining the type of general insurance policy you need is to assess the risks your business faces. Identify the areas where your enterprise is most vulnerable and take into account any regulatory requirements that may apply to your business.

For example, if you run a construction company, you would require a different policy than if you run a restaurant chain. Knowing your risks will help you choose the right type of policy that will cover you in the event of an accident or incident.

What are the top 10 business risks covered by insurance:

1. 1. Property Damage: Protection against damage or loss of physical assets such as buildings, equipment, and inventory due to events like fire, vandalism, or natural disasters.
   2. Liability Claims: Coverage for legal expenses and damages arising from third-party bodily injury, property damage, or personal injury claims against the business.
   3. Business Interruption: Compensation for lost income and extra expenses incurred when business operations are disrupted due to events like fire, theft, or natural disasters.
   4. Cybersecurity Breaches: Insurance coverage for data breaches, hacking incidents, and other cyber threats that compromise sensitive information and disrupt business operations.
   5. Employee Injuries: Workers’ compensation insurance provides benefits to employees injured on the job, covering medical expenses and lost wages while protecting the business from lawsuits related to workplace injuries.
   6. Product Liability: Protection against claims for damages caused by defective products or goods manufactured, distributed, or sold by the business.
   7. Professional Liability: Coverage for claims alleging negligence, errors, or omissions in professional services provided by the business, such as legal, medical, or consulting services.
   8. Commercial Auto Accidents: Insurance coverage for vehicles owned or used by the business, protecting against damages and liability claims arising from accidents on the road.
   9. Natural Disasters: Coverage for damages caused by natural events such as earthquakes, floods, hurricanes, or tornadoes, which can impact property and disrupt business operations.
   10. Employment Practices Liability: Protection against claims of discrimination, harassment, wrongful termination, or other employment-related disputes brought by employees or former employees.

2. Understand Coverage Limits

Make sure you have adequate coverage for all the risks identified earlier. It is essential to be aware of coverage limits when deciding on your policy. Coverage limits refer to the maximum amount an insurance company will pay out during a policy term. It’s essential to strike a balance between adequate coverage and affordable rates while keeping in mind the risks faced by your business.

The most common insurance coverage limits for businesses vary depending on factors such as industry, size, and risk exposure.

What are most common coverage limits for a business?

1. 1. General Liability Insurance:

• • • Bodily Injury Liability: Typically ranges from $100,000 to $1 million per occurrence.
    • Property Damage Liability: Typically ranges from $100,000 to $1 million per occurrence.

1. 2. Commercial Property Insurance:

      • Building Coverage: Varies based on the property value and location.
      • Business Personal Property Coverage: Usually ranges from $10,000 to $1 million.
      • Business Interruption Coverage: Often based on the business’s estimated income and expenses.

1. 3. Business Owners Policy (BOP):

      • Typically offers combined coverage limits for general liability, property, and business interruption, with varying limits based on the policy.

1. 4. Workers’ Compensation Insurance:

      • Benefits for medical expenses, lost wages, and disability typically have statutory limits set by state law.

1. 5. Commercial Auto Insurance:

      • Bodily Injury Liability: Usually ranges from $100,000 to $1 million per occurrence.
      • Property Damage Liability: Typically ranges from $50,000 to $500,000 per occurrence.

1. 6. Professional Liability Insurance (Errors and Omissions):

      • Coverage limits vary widely depending on the industry, with typical limits ranging from $100,000 to $5 million or more.

1. 7. Cyber Liability Insurance:

      • Data Breach Response and Notification Costs: Often ranges from $100,000 to $1 million.
      • Cyber Liability and Data Restoration: Typically ranges from $100,000 to $5 million or more.

1. 8. Umbrella Liability Insurance:

      • Provides additional coverage above the limits of underlying liability policies, with limits starting at $1 million and going up to $10 million or more.

It’s essential for businesses to assess their risk exposures carefully and work with insurance professionals to determine appropriate coverage limits tailored to their specific needs and circumstances. Coverage limits should reflect the potential costs of claims and lawsuits faced by the business, as well as regulatory requirements and contractual obligations. Regular reviews of coverage limits are also recommended to ensure that insurance protection remains adequate as the business evolves.

3. Analyze Deductibles

Deductibles refer to the amount of money you have to pay from your own pocket before your insurance policy kicks in. Insurance companies often allow businesses to choose their deductible for certain types of insurance coverage. The deductible is the amount the insured must pay out of pocket before the insurance policy begins to cover a claim.

Businesses can typically select their deductible based on their risk tolerance, financial capabilities, and budget considerations. Higher deductibles usually result in lower insurance premiums, while lower deductibles lead to higher premiums.

Insurance companies may offer a range of deductible options for policies such as property insurance, general liability insurance, and commercial auto insurance. It’s essential for businesses to carefully consider their deductible choices and balance the potential cost savings with their ability to cover the deductible amount in the event of a claim.

4. Evaluate the Insurance Carrier

You should invest in an insurance policy from a reputable provider.

Here’s how to evaluate a business insurance carrier:

• • Financial Strength Ratings: Check the insurer’s financial strength ratings from independent rating agencies such as A.M. Best, Standard & Poor’s, Moody’s, and Fitch Ratings. These ratings reflect the insurer’s ability to fulfill its policy obligations and withstand financial challenges.
  • Claims Handling Reputation: Research the insurer’s reputation for claims handling. Look for customer reviews, testimonials, and industry rankings to gauge the insurer’s responsiveness, fairness, and efficiency in processing claims.
  • Coverage Options: Evaluate the insurer’s range of coverage options and policy features to ensure they align with your business needs. Consider whether the insurer offers customizable policies tailored to your industry, size, and risk profile.
  • Customer Service: Assess the insurer’s customer service quality, including accessibility, responsiveness, and professionalism. Contact the insurer directly or speak to other policyholders to gauge their satisfaction with the insurer’s service.
  • Experience and Expertise: Consider the insurer’s experience and expertise in providing insurance solutions for businesses in your industry or niche. An insurer with specialized knowledge of your industry’s risks may offer tailored coverage and better risk management advice.
  • Regulatory Compliance: Verify that the insurer is licensed and authorized to conduct business in your state or jurisdiction. Check for any disciplinary actions or complaints filed against the insurer with state insurance departments.
  • Claims Payment History: Review the insurer’s claims payment history to assess its track record of honoring policyholder claims. Look for information on claims settlement ratios, payout timelines, and any disputes or legal actions involving claims.
  • Pricing and Value: Compare the insurer’s pricing and value proposition against other insurers in the market. Consider not only the premiums but also the coverage limits, deductibles, and policy features offered to determine the overall value of the insurance coverage.
  • Stability and Longevity: Consider the insurer’s stability and longevity in the insurance industry. Look for established insurers with a proven track record of financial stability, longevity, and continued growth.
  • Reputation and Trustworthiness: Research the insurer’s reputation and trustworthiness within the insurance industry and among policyholders. Look for industry awards, accolades, and accreditations that reflect the insurer’s commitment to excellence and integrity.

5. Review Exclusions and Endorsements

Reviewing exclusions and endorsements in a business insurance policy is crucial to understanding the scope of coverage and any limitations or enhancements to the standard policy.

Here’s how to effectively review exclusions and endorsements for Business Insurance Policies

• • Understand the Policy Structure: Familiarize yourself with the layout of the policy document. Exclusions and endorsements are typically found in separate sections following the main coverage provisions.
  • Read Carefully: Thoroughly read through the exclusions and endorsements sections of the policy. Exclusions outline specific risks or circumstances that are not covered by the policy, while endorsements modify or add coverage to the standard policy terms.
  • Identify Key Exclusions: Highlight or make note of any exclusions that may impact your business operations or leave you vulnerable to potential risks. Common exclusions include acts of terrorism, pollution liability, or certain types of property damage.
  • Review Endorsements: Pay close attention to any endorsements attached to the policy. Endorsements may provide additional coverage for specific risks relevant to your business, such as coverage for cyber liability, professional liability, or extended property coverage.
  • Consult with an Expert: If you’re unsure about the implications of any exclusions or endorsements, consider consulting with an insurance professional or legal advisor. They can help clarify the language used in the policy and provide guidance on how it may affect your coverage needs.
  • Evaluate Impact on Coverage: Assess how the exclusions and endorsements impact the overall coverage provided by the policy. Determine whether additional coverage is needed to address any gaps identified by the exclusions or if certain endorsements provide unnecessary coverage.
  • Negotiate Changes if Necessary: If you identify exclusions or endorsements that you believe are unfair or inadequate for your business needs, discuss them with your insurance provider. You may be able to negotiate changes to the policy language or add endorsements to address specific concerns.
  • Document Review Process: Keep thorough records of your review process, including any notes, correspondence with your insurance provider, or changes made to the policy. This documentation can be valuable in the event of a claim or dispute regarding coverage.

By carefully reviewing exclusions and endorsements in your business insurance policy, you can ensure that you have a clear understanding of your coverage and take steps to address any gaps or limitations in protection.

6. Keep Reviewing Your Policy

Finally, make a point of reviewing your policy annually to ensure your coverage keeps up with your ever-changing business needs. It is crucial to adjust your coverage as your business evolves. As your business grows and changes, so will your insurance needs.

When should you review your business insurance policy?

Here are some key times when it’s important to review your business insurance policy:

• • Annually: Schedule an annual review of your business insurance policy to ensure it still aligns with your current needs, operations, and risks. Your business may have evolved over the past year, so it’s essential to update your coverage accordingly.
  • Renewal Time: Take the opportunity to review your policy when it’s up for renewal. Compare your current coverage with alternative options from different insurers to ensure you’re getting the best value for your premium.
  • Business Changes: Any significant changes to your business operations, such as expansion, relocation, or diversification of services, may warrant a review of your insurance policy. Update your coverage to reflect these changes and ensure adequate protection.
  • New Risks: If your business faces new risks or exposures, such as entering into new markets or adopting new technologies, review your insurance policy to assess whether it provides sufficient coverage for these risks.
  • Legal or Regulatory Changes: Stay informed about changes in laws or regulations that may affect your business insurance requirements. Review your policy to ensure compliance with any new legal obligations and adjust coverage as needed.
  • Major Purchases or Investments: When making significant purchases or investments in your business, such as acquiring new equipment or vehicles, review your insurance policy to ensure that these assets are adequately covered.
  • Claims or Incidents: After filing a claim or experiencing a significant incident, review your insurance policy to understand how the coverage responded and whether any adjustments are needed to prevent similar issues in the future.
  • Insurance Market Changes: Keep an eye on trends in the insurance market, such as changes in premiums, coverage options, or insurer ratings. Review your policy to ensure that it remains competitive and meets your needs in the current market environment.

By regularly reviewing your business insurance policy, you can ensure that your coverage remains up-to-date, comprehensive, and aligned with your business’s evolving needs and risks.

The right general insurance policy ensures that your business is prepared to face any unforeseen events and comes out unscathed. This guide gave insights into six key elements that business owners should consider when investing in a general insurance policy, including knowing your risks, understanding coverage limits, analyzing deductibles, evaluating your provider, reviewing exclusions and endorsements, and keeping your policy up to date.

By following these steps, you will invest in a policy that will protect your business and minimize risk, giving you peace of mind.

Reach out to Gordon Insurance to review your existing policy or talk about a new policy.