Business Insurance: The Best-Case Scenario Is to Be Prepared for the Worst


Written by: Jon McGraw

Risk is inevitable in any business. But a foundation of general coverage combined with policies specific to your company helps protect against losses that may disrupt or bankrupt even the most cautious business owners. The right mix of insurance can make your personal wealth less vulnerable—yet adequate and appropriate protection is often overlooked until it’s too late.

Selecting the right mix requires a strategic approach that accounts for the many exceptions and exclusions found in typical coverage. Regular reassessment of your policies is important to eliminate gaps and redundancies, which helps protect and grow your business investment. While it’s important to balance between protection and cost, the following 10 types of insurance are established ways to manage risk in an extremely litigious society:

General Liability Insurance

Considered the baseline of business insurance, general liability provides for defense and damages in claims of bodily harm, property damage or personal injury. If accidents land your business in court, this insurance covers losses related to legal, medical and other related payments, such as settlements for libel and slander.

Errors and Omissions (E&O) Insurance

Also known as professional liability insurance, this coverage protects business owners who provide a professional service rather than a product. E&O insurance goes beyond general liability to protect your business against claims of negligence—alleged or actual. It covers harm that results from inadequate work, including incorrect advice.

Property Insurance

In selecting coverage for your commercial property, consider the particulars of your business space, including the equipment, inventory and tools needed to maintain your operations. Generic all-risk policies generally cover damage from such perils as vandalism and fire, but they often do not cover damage incurred in a natural disaster such as a flood or earthquake. Make sure you understand your exclusions, and if you want a specific type of natural disaster to be covered, ask for an insurance rider.

Business Interruption Insurance

Many businesses that close due to natural disaster never recover, but this policy, also known as business income insurance, can cover lost income from forced closings and during rebuilding. Adding this coverage to your property insurance can mitigate the unforeseen and unintended consequences of a disaster by recouping lost income, minus the expenses your business would have incurred under normal conditions.

Directors and Officers Insurance

Civil and criminal actions can be brought against a company’s directors and officers as well as the business itself. This policy covers reimbursement when alleged wrongful acts have adverse financial consequences for the business, and it often contains “shrinking limits” provisions for defense costs that reduce the policy’s limits. It does not protect against intentional illegal acts.

Workers’ Compensation Insurance

State laws vary, but workers’ compensation insurance is required for all employees. It provides for wage replacement, as well as medical, disability and death benefits, in the event an employee is injured or becomes ill. In exchange, employees give up the right to sue the business for injuries, which protects the company against costly claims from occupational hazards.

Employee Theft Insurance

Fraud comes in many forms, and employee dishonesty is far more common than external theft, so exposure to incidents of intentional misconduct by employees cannot be underestimated. Also known as fidelity insurance, employee theft insurance covers potentially crippling damages from internal risk, such as embezzlement, regardless of whether the crimes were perpetrated by employees acting alone or in collusion.

Employment Practices Liability Insurance (EPLI)

Small businesses are not immune from lawsuits claiming a violation of employees’ rights. This policy protects against wrongful acts arising from the employment process, such as discrimination, invasion of privacy, wrongful termination or sexual harassment. It covers legal costs, whether your company wins or loses the lawsuit, though it does not typically pay for punitive damages, including civil fines related to bodily injury, nor criminal fines related to dishonesty.

Product Liability Insurance

This policy covers against claims of defective manufacture, design and warnings, with options to customize based on specific types of products. It provides protection against bodily injury and property damage losses arising from defects in products your business sells or distributes. It can cover liability incurred by a contractor after a job is completed, known as completed operations coverage.

Classified Information Breach Insurance

As businesses grow ever more dependent on technology, they also become more susceptible to hacking attacks and privacy violations. Insurance that covers against theft of intellectual property can be overwhelming, as it often bundles several types of policies. However, coverage against compromised user data—from employees and customers alike—guards against potentially devastating costs to both your business and reputation.

Peace of Mind Is an Invaluable Asset

The range of insurance options available can seem alarmist or excessive, but not when considered against the current and future value of your business. Buttonwood Financial Group works with you to simplify the complexity that comes from wealth while acknowledging that there is no “one size fits all” approach to coverage. If you are interested in seeing how you can minimize your risk, call us at 816.285.9000.

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