Business insurance coverage protects businesses from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability and employee-related risks. Companies should evaluate their insurance needs based on potential risks, which can vary depending on the type of business and the environment in which the company operates.
It is especially important for business owners to carefully consider and evaluate their business insurance needs because they may have personal financial exposure in the event of a loss. If a business owner does not feel he or she has the ability to effectively assess business risk and the need for coverage, our insurance experts will assist them in the process.
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General liability insurance coverage is something most businesses simply must have, so it’s essential that you understand what it does and doesn’t cover.
General Liability is also commonly referred to as Comprehensive Commercial Liability. General liability insurance covers liability claims of bodily injury, other physical injury or property damage. This means you are covered for accidents at your business or at your clients’ place of business. It also covers the cost to defend or settle claims, whether they are fraudulent or not.
It is important to remember that general liability insurance policies exclude professional liability insurance claims against your business. That’s why we typically recommend small businesses complement their general liability insurance coverage with property insurance to ensure maximum coverage in your office or at your clients’ places of business. You can bundle this into your business owner’s policy (BOP) and customize your coverage levels to insure risks that are inherent to your industry. A general liability and property package policy covers any theft or destruction of your business’ property, computers, hardware and software.
Simply put, general liability insurance coverage protects your business and its assets. In the event a customer is injured at your place of business or from a product you sell, your general liability insurance policy will protect you. But, remember, general liability insurance only protects you against certain types of claims.
WORKERS’ COMPENSATION INSURANCE
Workers’ compensation insurance is required in most states. Also known as “workman’s comp,” it represents a compromise between employers and employees regarding employment related injuries or illnesses.
Your employees relinquish their right to sue you if they suffer an on-the-job injury or illness. In return, you, the employer, agree to provide state-mandated benefits as a result of that on-the-job injury or illness.
To ensure employees have the money to pay these state-mandated benefits, most states require that employers demonstrate that they have the financial ability to pay any claims that may arise. Typically, this financial ability is demonstrated through the purchase of workers’ compensation insurance.
Laws regarding workers’ compensation insurance vary state by state.
WORKERS’ COMPENSATION INSURANCE TYPES
Most workers’ compensation insurance policies provide two types of coverage: WORKERS’ COMPENSATION COVERAGE and EMPLOYERS LIABILITY COVERAGE.
WORKERS’ COMPENSATION COVERAGE
This type of insurance provides benefits for injured workers as required by state law regardless of who is at fault for the job-related injury or illness. In other words, whatever benefits your state requires, your workers’ compensation policy would provide.
EMPLOYERS LIABILITY COVERAGE
COMMERCIAL PROPERTY INSURANCE
Commercial Property Insurance for small business covers your business’s physical assets, whether you own your own building, lease office space, or work from home.
Business property insurance covers your computers, phones, furniture, inventory, other’s property and more.
We provide insurance policies that can cover your business property if:
– A fire destroys your building and everything inside
– A storm damages your outdoor sign or property
– Your building is vandalized or robbed
In many states, properties that are deemed to be in a flood zone require additional flood insurance. This is particularly important for businesses that can sustain damages of computer hardware, office furniture, and more. Many of our Commercial Property Insurance products will supplement your income if your business is forced to suspend operations due to a qualifying event. Property insurance coverage is usually combined with general liability insurance to ensure maximum coverage for your business.
ERRORS AND OMISSIONS INSURANCE
In the litigious world we live in today, businesses need to protect themselves with errors and omissions insurance. Also known as professional liability, E&O insurance is appropriate for any company that provides advice, makes educated recommendations, designs solutions or represents the needs of others. Investment advisors, IT staffing firms, doctors, accountants, attorneys, and more should all have E&O insurance coverage.
An errors and omissions insurance policy can protect you against loss from a claim of alleged negligent acts or “errors and omissions” in the performance of your professional services.
WHAT IT COVERS:
-Legal defense costs required to prove your case
– All employees including W-2 employees and 1099 subcontractors
– Optional coverage for allegations of copyright infringement and intellectual property infringement
– Personal Injury against claims of libel, slander and invasion of privacy
– Worldwide coverage if the suit is brought in the United States
Regardless of what kind of business you own, customers can claim that something you did on their behalf was done incorrectly, and that this error cost them money or caused them harm in some way.
CYBER LIABILITY INSURANCE
It’s standard practice of any business that uses technology to keep electronic records of clients, customers, and employees. When a business engages in various actives such as selling on the Internet or collecting data within an internal electronic network, it has the potential to be infiltrated. In today’s environment data breaches happen every day. Your business needs to be prepared for the costs that are associated with a data breach.
Dealing with a data breach can be costly. Additionally, you can face penalties or fines as most states regulate personal information data. Your business will also be responsible for providing credit monitoring and notifications to inform everyone on the data network that there has been a breach. The costs add up when legal fees and damages are involved so it is important to have a plan to protect personal information data from breaches.
Cyber liability is an insurance policy that can help protect your business from data and other electronic information liabilities. To better understand if your business needs cyber liability, here are some common coverages that can be included:
MULTIMEDIA / MEDIA LIABILITY
Third-party damages covered can include specific defacement of website and intellectual property rights infringement.
EXTORTION LIABILITY COVERAGE
Typically covers losses due to a threat of extortion or professional fees related to dealing with extortion.
NETWORK SECURITY LIABILITY
Third-party damages as a result of denial of access, costs related to data on third-party suppliers, and costs related to the theft of data on third party systems.
Businesses are different because people are different, therefore it is key to understand the cyber risks your business faces to ensure your cyber policy is tailored to mirror those risks.
COMMERCIAL AUTO INSURANCE
Commercial auto insurance covers injuries that you or your employees may cause to other people and their property while driving. A typical commercial auto policy may include:
which protects you and your company by paying for bodily injury or property damages you may become legally liable for as a result of a covered automobile accident
which pays medical expenses, up to your coverage limit, for you, your employees and your passengers arising from motor vehicle accidents – regardless of who is at fault
which can help pay for damage to your vehicle from something other than another vehicle like vandalism, theft, weather events and accidents involving animals (subject to deductible)
which pays for damage to your vehicle from another vehicle whether you hit another vehicle or object, another vehicle hits you, or your vehicle rolls over – regardless of who is at fault (subject to deductible)
UNINSURED AND UNDERINSURED MOTORIST COVERAGE
which pays for medical expenses, loss of income and other damages owed to you, your employees (expenses that are not covered by workers’ compensation) or your passengers when an accident is caused by an uninsured or underinsured motorist
A commercial auto policy also can include coverage for cars you borrow or rent, as well as coverage for employees who use their cars for your business.
HIRED AND NON-OWNED AUTO LIABILITY INSURANCE
Hired and Non-Owned Auto Liability helps protect your business from any auto liability you or your employees may face. Any time an employee is conducting business and activates with a vehicle, your business can be held responsible for any accidents, bodily injury, or property damage that may occur. This coverage applies to vehicles that are rented or hired during the normal operation of a business.
WHAT DOES IT COVER?
Hired and Non-Owned Auto Liability covers bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles (vehicles owned by others, including vehicles owned by your employees).
This coverage does not cover the physical damage to the vehicle itself—this part is important to understand. There is only coverage for a liability situation, meaning that any damage to someone else’s car or property is covered. Again, there is no physical damage coverage with Hired and Non-Owned Auto Liability.
If something does happen, coverage kicks in once found legally liable. The personal auto insurance policy will provide primary insurance to both employee and company if the employee is using their own vehicle on company business. If coverage limits are met on the personal auto policy, the liability can then fall on the business. If you don’t have Hired and Non-Owned Auto Liability coverage to help provide benefits, you will be stuck paying out of pocket.
If coverage is going to cover an incident, it will provide defense costs, property damage costs, and medical payment if someone is injured up to the stated limit.
If you run errands for your business or need to rent a car for work travel, you will want this liability coverage if something happens.
Examples where Hired and Non-Owned Auto Liability can help cover your business include:
• Employee is sent to pick up lunch
• Rental car for business trip
• Hire a limo service to pick up important clients
• Employee picking up office supplies
• Employee goes to a post office
• Employee runs to the bank
DIRECTORS AND OFFICERS INSURANCE
Directors and Officers Liability Insurance (often called D&O) is a type of insurance that’s protects the management of a business or corporation and the corporation itself. Directors and Officers insurance is usually purchased by the company itself, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but commonly it assists a company in attracting and retaining directors.
DIRECTORS AND OFFICERS LIABILITY INSURANCE USUALLY COVERS
Claims arising from wrongful or negligent acts committed by the Directors or Officers during the term of their duty.
Coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously.
PROFESSIONAL LIABILITY INSURANCE
Professional liability insurance, more commonly known as errors & omissions (E&O) is a form of liability insurance which helps protect professional advice and service providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm.
Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal, and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.
COVERAGE FROM PROFESSIONAL LIABILITY INSURANCE
Coverage sometimes provides for the defense costs, including when legal action turns out to be groundless.
Coverage does not include criminal prosecution, nor a wide range of potential liabilities under civil law that are not enumerated in the policy, but which may be subject to other forms of insurance.
Professional liability insurance is required by law in some areas for certain kinds of professional practice.
EMPLOYMENT PRACTICES LIABILITY INSURANCE
Employment Practices Liability Insurance (EPLI) is a type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include, wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including (but not limited to) employment-related: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation.
The policies cover directors and officers, management personnel, and employees as insureds. The most common exclusions are for bodily injury (BI), property damage (PD), and intentional/dishonest acts. EPLI policies are written on a claims-made basis. The forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy. In addition to providing directors and officers (D&O) and fiduciary liability insurance, management liability package policies afford the option to cover employment practices liability (EPL).
EXCESS LIABILITY (UMBRELLA) INSURANCE
As its name implies, umbrella insurance extends your coverage beyond the limits of your basic business insurance. Also referred to as excess liability insurance, umbrella insurance is important because it covers unexpected events. It’s generally not expensive and in certain instances, it could literally save your business. For example, if your general liability insurance covers you up to $1 million, but your claim settlement calls for you to pay $1.5 million, your umbrella insurance will cover the additional $500,000.
No one expects a disaster to strike his or her business, but every small business is vulnerable to a catastrophe or lawsuit. Think about some of the devastating losses you’ve heard about recently, or the large settlements that are awarded in courts. Some of these losses could exceed your primary insurance coverage unless you protect your business with umbrella insurance. Umbrella Liability adds coverage to General Liability, Hired and Non owned Auto Liability and Employers Liability all for one single premium. It is important to note that excess liability coverage does not apply to your professional liability insurance policy.
FIDELITY AND SURETY BONDS
Bonds are generally divided into two types, Fidelity Bonds and Surety Bonds. Fidelity and Surety bonds are a form of insurance issued by licensed insurance companies and are used to manage risk and protect against damage or loss in commercial transactions. Sometimes the bonds are required by law before commercial parties may engage with each other. In other cases, the bond may be obtained as needed when there is risk or concern about the performance of an employee or contracting party.
Fidelity Bonds are technically a form of Surety Bond but are usually considered a distinct product in common usage. They are issued as a guarantee against loss due to employee dishonesty. As such, they are an important part of a company’s insurance program, since they cover areas not covered in the companies Liability and Property coverage.
Your employees’ dishonest acts are a principal area of your insurable risks and Fidelity Bonds provide principal insurance protection.
Fidelity Bonds come in several forms, including:
Individual Bonds where an individual employee is bonded. Individual Bonds are not standardized. They can be used for unusual situations or activities and can be specially scripted.
Scheduled Bonds where individual positions (called a Positions Schedule Bond) or named individuals (called a Name Schedule Bond) are covered, for example all branch personnel in a bank, or all tellers.
Blanket Bonds cover all employees and provide the most complete coverage of the three types. The coverage is especially valuable because of the latitude given in demonstrating a covered loss. The employer doesn’t need to show that a specific covered employee caused a loss. If the employer can show that an employee must have caused the loss–that it was an “inside job”, then coverage will be provided
Discovery Bonds are an important extension of the Fidelity Bond types. A Discovery Bond allows a first-time buyer of Fidelity Bonds to protect against undiscovered loss that occurred before the bond was issued. If you, as employer, have just realized the need for a Fidelity Bond as part of your insurance coverage, you should also consider buying Discovery period coverage.
A Surety bond is a legal document created between two parties, a principal and an obligee, guaranteeing the completion of a contract. Surety bonds require the person performing the job, known as the principal, to pay a set amount to be held by the bond company to guarantee the principal’s performance.
When the principal does not perform according to the stated outcome, the surety bond requires a payment to the obligee for damages, time that’s wasted or other problems associated with an incomplete performance.
For instance, a business owner may create a surety bond to manage how an independent worker completes an important project. The surety bond might include a description of what work must be performed, the date on which the project must be completed and an amount to be paid if the obligation is not met.
Surety Bonds are issued to cover an extremely wide range of actions and situations. They are issued by surety companies, and can be classified into one of the following areas:
• Contract Bonds
• Court Bonds
• Federal Bonds
• License and Permit Bonds
• Public Official Bonds
• Other/Miscellaneous Bonds
License and permit bonds are a sub-category of bond type. This commercial bond is required by certain federal, state or municipal governments as a prerequisite to receiving a license or permit to engage in certain business activities.
Government agencies require business owners in certain industries to purchase their bonds before they can be legally licensed. Bonds protect consumers by guaranteeing business adheres to laws and other regulations enforced by federal state and local government agencies.
These bonds function as a guaranty from a Surety to a government and its constituents.
HERE ARE SOME OF THE COMMON BONDS YOU MAY NEED:
Contractor License Bonds – assure that a contractor such as a plumber, electrician or general contractor complies with laws relating to his field.
Customs Bonds – protect the public if they do not follow federal regulation, pay required taxes or duties to the U.S. Customs.
Mortgage Lender Bond – protects clients if a business does not follow state regulations by charging undisclosed fees on mortgage loans.
Insurance Broker Bond – lets you legally operate as an insurance broker and protects clients from insurance fraud.
Motor Vehicle Dealer Bonds – assure dealerships to compile with laws relating to that field.
Health Spa Bonds – Allows for legal collection of membership dues for a health club.
It is the business owner’s responsibility to have a license bond before conducting work. Check government and state websites for more information in your industry.