Everyone who owns an insurance policy has had that moment. You go to make a claim, and suddenly find out that a basic emergency you thought would be covered is not. In your personal life, this can be frustrating and expensive, but for your business, knowing what gaps your insurance policy has can be the difference between surviving disaster and closing your doors forever.
These are some common gaps in business insurance policies. Assess their likelihood in your area, and understand what to do if they happen to you.
If your employees drive for your business, are they covered under their own insurance, or yours? If the answer is yours, do you have adequate coverage for each driver and vehicle on the policy? If theirs, does the employee carry sufficient coverage to ensure that any damage done while they’re on the clock will be covered?
Auto coverage is a sticky area that can depend on state law, company policy, and your insurance. If you have employees who drive for the company regularly, make sure to discuss this with your insurance agent, so that your coverage is sufficient. Let your agent guide how the conversation continues with your employees.
Many companies assume that their general liability coverage will handle any physical damage to data systems. While the physical servers or computers, for example, might be covered, the cost of a data breach or loss goes far beyond replacing servers. Covering consumer loss, managing downtime due to replacement systems, and extra IT hours to close any backdoors or loopholes are all expensive.
The losses when a company suffers data damage can run into the hundreds of thousands, and insurance policies may not cover this without additional policies.
Cash value versus replacement cost
One significant liability many companies need to manage is that they insure their assets based on cash value, not on replacement costs. In the event of a disaster, they may not receive enough of a payout to keep their business functioning.
Many businesses use lower values to reduce their monthly premiums, and believe that some coverage is better than none. While this is true in theory, if your insurance won’t help you survive a disaster, then there’s no point in having the insurance in the first place. Understand how much it would cost to replace your assets, and insure at that level.
Employee liability coverage
The most common issue with employee liability at the present time is discrimination lawsuits. Not all employers realize that they fall under the employment category as soon as someone comes in for an interview. Even if a discrimination claim is ultimately determined to be unfounded, the cost and consequences for managing the lawsuit can be extensive.
In a perfect world, treating everyone equally and avoiding inappropriate statements and situations would be all that was necessary to avoid discrimination claims. Unfortunately, the perception of the employee or interviewee is often what is necessary to start the ball rolling. After all, few companies go into the interview room or the board room intending to discriminate against an employee. Having adequate coverage is just the smart thing to do.
The good news is that any of these coverage gaps can be addressed by reviewing your business policies. On an annual basis, it is best to update valuations, make sure that there are no noticeable gaps that you aren’t prepared to cover, and reassure yourself that you meet all the safety precautions.
Thank you to Sam Meenasian for this guest post. Meenasian is the operations director of USA Business Insurance and BISU Insurance and an expert in commercial lines insurance products. With 10 plus years of experience and knowledge in the commercial insurance industry, Meenasian contributes his expertise to help small business owners.
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