Gone are the days of buying insurance directly from an insurance broker or company whether or not it’s done online, which leads to poor and costly protection. The lack of insurance payout on business interruption claims due to Covid disruptions was prime evidence of how the insurance industry operates for its own profit and not that of the business buying the insurance. You can simply look up the number of business lawsuits against insurance companies in the US and Canada.
What is the purpose of buying insurance if you end up going to court against the insurer with a high chance of losing? (businesses did sign up to insurer terms and conditions after all). For insurance to be effective, it needs to be audited, reworded, or managed by risk experts independent of any insurance broker or company. And although there is an additional party involved in the process of buying insurance, this actually results in lower net costs to the business.
Let the risk manager or advisor guide you on changes to be made, and then yourself or the risk advisor can have those changes negotiated with the insurance broker. This is very important because running a business is not easy, there is constant business risk involved as part of daily routine. That’s the reason why most startups fail to thrive when hit with a crisis. And in today’s world, a crisis happens more often than we think, in fact substantial losses due to the external environment can occur every 3-5 years now. Now, more than ever, there is an absolute need for having business insurance and for it being audited by independent risk experts.
Many people seem to see insurance as an added expense, but it is an investment in the business just like technology. Auditing your insurance is a key business investment and should be done on a yearly basis at a minimum.
Why Do You Need To Have Tailored Business Insurance?
With business, your own financial mishaps could wipe out all of your assets taking you back where you started. Having insurance protects you from having to start over or fall behind and therefore gain an edge over competition. On top of having that peace of mind, well tailored business insurance would also lead to better financing and valuation.
Having the right insurance can give you that additional comfort of knowing that you won’t be paying for financial damages out of your own pocket. Additionally, it not only protects you and your assets, but also the people who work for you.
The most important thing is to have the insurance wording tailored and reworded to fit your own unique business risks as opposed to signing up to wording that is designed by the insurer and sold by the broker to tens of thousands of businesses with no consideration to the details of your own operation.
The irony is that when you tailor your insurance, it becomes less costly because you get rid of all the nonsense coverage that brokers sell to you.
5 Must Have Tailored Business Insurances
Being a business owner means having to fight new challenges everyday. Having these 5 business insurances will be a blessing in disguise when tough situations arise and your business has to go through some turbulence, whether in the face of physical, cyber, or financial risks.
1. Tailored General Liability Insurance with Property and Business Interruption.
General Liability is financial protection against damages and injuries occurring to third parties from your daily business routines. Almost every business needs this insurance.
It also bears the cost of any legal lawsuits stemming from bodily injuries or any property damages incurred to third parties or consumers arising out of your business. If you’re running a business under a rented roof, this insurance may cover damages to your landlords as well.
However, general liability insurance does not cover other losses such as any business mistakes, workman mishaps, credit losses, etc. as these can be covered by separate insurance policies. There are different insurance policies for different loss scenarios.
You will need to request an insurance audit for this insurance to be effective before you finalize binding with the insurance broker. It is best that the insurance audit be done at least once a year to ensure continuity of tailored coverage and best cost. In fact you can even have the broker, or your accountant or lawyer, request (and potentially pay for) the insurance audit on your behalf. The process of auditing insurance is the same for every type of product outlined in this article.
2. Product Liability Insurance.
Product Liability Insurance protects you from property or personal damages caused to consumers or third parties from your or your supplier’s products. You and your company will be liable for damages caused by any products manufactured, distributed, assembled, grown, stored, etc, by your company. This applies to all e-commerce companies for example because they essentially act as distributors to a product.
Any business owners and management associated with such damages can be liable to compensate others for those damages. But even if they are not at fault, they still have to pay for expensive lawyer fees and other defence costs in case they are incorrectly sued. Having product liability insurance will cover any associated costs as well as the hefty charges of lawsuits.
There are different types of product liability issues ranging from property damage to being health hazardous. Some of the main causes of such issues are as follows.
Design Defect: Any product having a defect in their core designs can render it to be faulty. It can hence lead to a liability claim if sold anyways.
Manufacturing Defect: A simple wrong assembly could lead to dangerous property damages. Hence leading to a lawsuit.
Health Hazardous: These liability claims are especially important to the food industry, especially for pre-packaged foods. It is essential that businesses take extra care of hygiene and proper ingredient labelling. Any health hazards caused due to improper care, faulty ingredient labelling, or other error, could lead to a lawsuit against the company owners as well as management.
Marketing Defect: Making false marketing statements such as adding faulty instruction manuals alongside the products. Moreover, incorrect product labelling can lead to product liability claims.
Protection Against False Complaints: Businesses face false liability complaints on a regular basis. Sometimes these complaints could lead to major lawsuits. Having product liability insurance will give you protection against any false liability complaints.
3. Tailored Employment Practices Liability Insurance .
If you run a bigger company, having employee insurance is a must have because it protects the business from any employee claims or lawsuits related to their employment, whether these are unfair wages, discrimination, sexual harrassment incidents, or other.
Again, even if the business is not at fault, there are defence costs to be paid and the insurance will take care of that for you. Just make sure the insurance is tailored to your needs.
4. Tailored Cyber Insurance.
All it takes is one hacker and a few data-hacking skills to heavily impact your organisation. Data breaches can lead to cyber-extortion and are subject to penalties by regulators.
Cyber crime is a massive online threat that businesses face on a daily basis. But this can also happen through POS systems, which can be hacked as well resulting in a customer’s credit card details being compromised. A single system hack can cost you millions restoring data and cleaning the system from bugs, defending against client lawsuits, and paying penalties to regulators.
Having tailored cyber insurance is the smartest investment you’ll make to protect the reputation of your company. Just think about the Microsoft Exchange breach that happened earlier this year: SMEs were impacted simply by using a Microsoft product, yet these SMEs were still liable to their clients and regulators even though they were not at fault. They also had to incur significant costs cleaning up and restoring their systems.
5. Tailored Professional Liability Insurance.
Professional liability insurance is a type of business insurance for any organization that offers services to clients. It offers financial protection against liability that is caused by your own workplace mishap or an unhappy customer.
A single mistake could lead to financial loss to the client who will then turn to pursue you and the business. Again, you may not be at fault, but legal costs are what will hurt the business the most.
Having tailored professional liability insurance will save you from those hefty costs tied to any professional mistake.
Other Insurance that can be tailored to your operations
Keep in mind that there are a number of business insurance policies out there used by businesses around the world. At the end of the day what matters the most is for you to measure your business risks and then find solutions to either avoid, reduce, or insure against them.