Finding the Right Insurance Coverage for Your Business

Historically, many in the insurance industry offered one-size-fits-all limits and coverages without any real explanations of what factors led to those recommendations. Most business owners just went along for the ride, assuming their agents or brokers knew best. Years would pass and, despite changing markets, business growth, technologies and other initiatives, their insurance coverages remained the same.

Sound familiar? If you haven’t reviewed your insurance policy lately, it’s vitally important to look closely at your coverage to make sure your business is protected in today’s rapidly evolving market. Let’s examine the five most common coverages and then pull back the curtain to look at other considerations.

5 Most Common Types of Business Insurance

Every business, no matter its size, generally requires the following five types of coverage:

1. Property - Property insurance covers all buildings as well as much of the contents inside, such as machinery affixed to structures, hardware, software, computers, furniture, etc. You can also select coverage for tools, machinery, and other equipment as needed.

2. Commercial Auto - Nearly every business has a couple of vehicles that need insurance. Even if you don’t have any company-owned vehicles, you may need additional coverage for employees’ vehicles if they drive them for work.

3. Workers’ Compensation - This coverage is not optional. Every state mandates workers’ compensation insurance to protect employees on the job. Premiums will range based on the type of business and associated risks — an office environment poses less risk than a commercial roofing company or overhead door contractor, for example.

4. General Liability - If you manufacture a product, there’s a potential risk of property damage or bodily injury once it goes to market, and liability insurance helps protect against potential lawsuits. General liability also covers your premise if a guest is on-site and sustains injuries from a fall or by other means.
   
   
5. Umbrella / Excess Liability - Many organizations want an additional layer of protection above and beyond the normal liability protection offered through their other coverages. In the event the underlying policies reach their limits due to an excessive claim, the umbrella liability would provide coverage.

Specific Industry Coverage

There are coverages designed to protect specific industries, including:

Liquor Liability - Anyone in the hospitality industry that serves alcohol, including hotels, bars, restaurants, etc., needs liquor liability. Premiums are based on sales volume. This coverage helps protect against lawsuits from someone being served too much alcohol.

Employment Practices Liability - Some companies opt for this coverage to protect against claims related to hiring, firing, promotions, harassment or discrimination.

Cyber Liability - This is one of the fastest growing areas of elected coverage due to increased online connectivity. The number of filed claims associated with data breaches continues to increase.

Business Interruption - This type of insurance covers the loss of income as a result of a business closure due to a natural disaster or other covered event, and may also cover employees’ salaries.

There are many other types of coverages available, so make sure you work with a broker who is familiar with your type of organization and can identify potential risks.

Determining Your Company’s True Replacement Value

Even when a company has the right types of insurance, it doesn’t mean they have the right coverage. An area that is often underestimated is the true replacement costs of a building. A business owner may have purchased a facility for $1 million, but the recommended insurance replacement value might be double or triple that amount.

Insurance replacement costs are calculated based on the cost to rebuild or restore a building to it original likeness, kind and quality. If a fire or natural disaster destroys a building, additional considerations besides replacing brick and mortar come into play, including electrical, plumbing, HVAC, building materials and labor costs. Additionally, there may be other expenses such as demolition and debris removal.

There are many calculators to help determine replacement costs, but working with your broker to perform a thorough analysis can ensure you’re properly covered if the unexpected occurs.

Should You Choose the Best Insurance or the Best Broker?

You might have an insurance carrier you prefer to work with, but unfortunately the broker isn’t your #1 choice. However, the broker you choose to work with is much more critical than which carrier you prefer.

An independent agent has relationships with many carriers and can show you a true snapshot of what market conditions are, and present some potentially better options you may not have even known existed. Your broker will get to know you, your business and your risk tolerance so he or she can go to market for you to find the most appropriate carrier.

Next Steps for Finding the Right Coverage

There are very few “industry norms” when it comes to insurance limits or deductibles for businesses. At McClone, we’ll help determine where you stand and conduct a no-obligation insurance review that includes a thorough analysis of your existing policies in addition to coverage recommendations and options. Reach out to McClone today and feel confident your business is properly protected.