In our continuing discussion of insurance for businesses, Peter Hedberg of Hiscox rejoins Dennis Zink and Fred Dunayer to explain the types of insurance available to businesses, along with some understanding of when and how to file claims.
Published: Monday, August 29, 2016
Among the things I do, I am a licensed insurance agent in Florida. After our Insurance 101 podcast on “Been There, Done That! with Dennis Zink,” we did a follow-up interview with Peter Hedberg of Hiscox Insurance. We discussed the types of insurance that business owners should know about and understand.
General liability was designed so businesses can continue to exist after bad things happen, whether or not it was their fault. It covers bodily injury and property damage to third parties, whether caused by your products or something you did, and it also covers advertising injury. If it’s alleged that you’re infringing a trademark or you have defamed somebody unintentionally, it will cover that. It also covers personal injury.
One of the most important protections general liability provides is defense coverage. If you are sued someone alleging that you did something wrong, one of the most important benefits of this policy is to pay to hire a defense attorney. Those costs are often outside of the limit, which means to say if you bought $1 million coverage, the defense costs don’t take away from that million. The million is still set aside for a settlement.
Professional liability is often referred to as errors and omissions, or E and O. This type of insurance is designed for a financial harm caused to a third party. It’s not coverage for bodily injury or property damage. People who carry this type of insurance are accountants, lawyers and doctors. Accountants provide a great example: If an accountant files your taxes incorrectly, it’s going to cost money to fix it with the government. That’s a financial loss you incurred because a professional rendered a service to you. Liability insurance will also protect accountants if you sue them.
A business owner’s policy is often a single policy that includes multiple lines of insurance. You get several types of coverage in one policy, usually at a discount.
Business-interruption coverage is typically triggered when you have a weather-related event that diminishes your ability to make money as a company. In Florida, a great example of this is a hurricane that prevents you from producing whatever you manufacture. Business-interruption coverage will pay for the extra expense to find a location to continue making your product. It will also pay for the income that you lost and will finance any additional facilities that you need or repairs to your damaged plant or office so you may continue operating.
Cyber insurance is a relatively new type of coverage. Although it’s been around for about 20 years, only recently have people become aware of it and started to purchase it. It has third party and first party components. The third-party component pays for defense attorneys to defend you when somebody alleges that you have wrongfully disclosed their personally identifiable, private or corporate confidential information.
The first-party component pays to notify the people affected if that’s your responsibility. It will pay for forensics to help identify the extent of the loss. It will also reimburse for data restoration or business interruption if it was a cyber event that caused the problem. Now that more people are purchasing cyber insurance, pricing has become more affordable.
Key person insurance is insurance that you don’t hear about too often. If you’re taking out a loan for your business, the bank might insist that you carry this coverage. It’s essentially life insurance on a key person within your organization.
Commercial property insurance will pay for the loss of use of your property. It will pay for the contents within your property. For small-business owners, one thing that’s important to know about this is business personal property. It covers all equipment — everything in your office — including computers, printers and so on. If you own the building, it’s obviously going to protect you if you lose the building, whether it’s a fire, a wind storm or similar disaster.
Business auto is automobile liability insurance. This coverage typically is in addition to your own personal policy. Your personal policy has to be triggered and exhausted before the business auto takes effect. It often has the hired and non-owned component, which means when you rent a car for the business the business auto policy then becomes the main auto policy for your rented car. This is very important, especially if you’re going to be renting cars for your business.
Theft insurance is often referred to as an employee dishonesty bond, or just employee dishonesty or crime insurance. When this product was created, it was meant to protect the company from employee theft. It’s been expanded in recent years to include theft by third parties against the business, such as computer fraud or burglary.
Medical insurance and employee benefits. Depending upon how many employees you have, in most states you have to provide medical insurance to your employees. Other types of insurance you can offer are life insurance, accident, death and disability insurance, either long-term or short-term. Many of these types of insurance are often offered as employee benefits.
Workers compensation. Many small businesses in America are not aware of workers comp or they are not purchasing it. Statutorily, they probably should. Many states will allow a waiver to be filed if you are your own business. It’s usually purchased anyway as it protects you as the employer if your employee gets hurt and finds you liable, or simply your employee gets hurt and they need their medical costs reimbursed.