When people think of their business insurance, they tend to think of property, contents and regular general liability, but they often forget about the dynamic evolution of risks that aren’t covered by most policies.
“With every lawsuit, something else pops up,” says Jonathan Theders, CRA, president of Clark-Theders Insurance Agency Inc. “A lot of times, companies stick with the status quo. They just renew their current policies to keep things going.”
However, blindly renewing your insurance ignores any new potential risks that may have cropped up since your last renewal. Instead, find a proactive broker to help you analyze your coverage for gaps to keep you from running into trouble later.
Smart Business spoke with Theders about how to find and plug gaps in your business insurance coverage.
What are some common gaps companies may have in their business insurance?
Employment practices liability insurance is a big one. Sexual harassment, wrongful termination and failure to promote are all under the employment area but are excluded under traditional insurance.
When people are laid off due to the economy, it could be a very logical business decision. But if the person blames the layoff on another reason and files suit, you still will have legal expenses, even if you didn’t do anything wrong.
Another common gap is data breach or cyber liability. Whether it’s credit cards or patient records, businesses record a great deal of personal information, and they have a duty to protect that data. That area also is excluded by traditional insurance.
Directors and officers is another key gap. When people think of D&O, they think of publicly traded companies, but even tightly held private companies can be affected by D&O gaps in liability coverage.
Pollution liability is another massive gap that a lot of people are not talking about. It’s excluded by nearly every liability policy.
Another area of concern is coverage limits. I recently met with two physicians with high net worth, multimillion dollar homes, tons of fine art and jewelry, and they had less than $1 million in liability protection. One said she’d had the same provider since she was 16 — she’s 40 now. Their coverage hasn’t kept up with their accumulation of assets.
Keeping up is critical for growing businesses. If you were a $1 million company and now you’re a $100 million company, you obviously would have different assets to protect and different liabilities that may occur, and your insurance needs to keep pace.
