Be Sure to Insure: 10 Types of Business Insurance Coverage to Consider

When it comes to protecting your business, having the right insurance coverage is crucial, but how do you know what types of coverage you need?

The first step is understanding some of the key different types of insurance coverage available to your business.

1. General Liability Insurance

Think of general liability insurance as your business's safety net against unexpected mishaps. It protects against third-party claims for bodily injury or property damage. For example, if a customer falls and is injured at your place of business, general liability insurance is intended to cover this type of claim. However, it is important to note that general liability insurance does not protect the company's own property. 

2. Property Insurance

Property insurance is your fallback in the face of unforeseen events such as fire, hurricanes, tornadoes, and vandalism that damage your company's real and/or personal property.

3. Fidelity Insurance

Fidelity insurance generally covers damage due to internal or external criminal acts. Fidelity insurance mitigates loss exposure resulting from criminal acts such as robbery, burglary, fraud, forgery, dollars stolen by third parties, and other crimes committed by an organization's own directors, officers, committee members, managers, and employees.

4. Worker's Compensation Insurance

Worker's compensation insurance provides replacement and medical benefits to employees who are injured in the course of employment. In North Carolina, any company with three or more employees is required to carry this type of insurance.

5. Director and Officer Liability Insurance

Leading a business comes with challenges, and director and officer liability insurance, commonly known as D&O insurance, provides an additional layer of protection for your leadership team. D&O insurance is payable to directors and officers, or to the company itself, as indemnification for losses or advancement of defense costs related to legal action against directors and officers of the company for the decisions they make.

It is important to evaluate and understand what a particular D&O insurance policy specifically covers. We recommend you consider including coverage for past, present, and future directors; defense against claims seeking non-monetary remedies; wrongful termination; illegal discrimination; and failure to procure insurance.

6. Cyber Insurance

Cyber insurance provides financial protection against the potentially devastating costs of a cyberattack or data breach. Cyber insurance policies may cover expenses to help your business mitigate the aftermath of an attack, such as forensic investigations, legal fees, customer notification, and regulatory fines. These policies may also cover business interruption losses and costs associated with public relations and crisis management efforts to help your company restore customer trust and confidence.

7. Umbrella Insurance

Umbrella insurance provides additional liability coverage beyond the limits of other insurance policies. While your primary policies, such as general liability, workers compensation, or automobile insurance, provide coverage up to a certain limit, umbrella insurance kicks in when those limits are exceeded. This extra layer of protection can be especially valuable in scenarios where a significant liability claim or lawsuit arises, such as a major car accident involving multiple vehicles. Without umbrella coverage, you could be left personally responsible for covering expenses that exceed the limits of your primary policies, putting your assets and the financial stability of the company at risk.

8. Representation and Warranty Insurance

During times of transition, such as a merger or an acquisition, consider purchasing representation and warranty insurance coverage to provide financial protection for breaches of representations and warranties made in connection with transaction. Depending on the size and purchase price of the transaction, this may be a worthwhile option.

9. Tail Coverage

Tail coverage extends coverage for claims made after a policy has expired, ensuring continued protection during periods of transition such as a merger, acquisition, or change in leadership. This can be useful if the statute of limitations for most claims extends beyond the sale of your business.

10. Commercial Auto and Non-Owned and Hired Coverage

Commercial auto insurance can provide coverage for company vehicle crash-related expenses, such as medical expenses and vehicle damage, as well as coverage for damage sustained in an accident with an uninsured motorist. However, commercial auto insurance does not provide coverage for vehicles that your business does not own, such as rented vehicles or employees' personal vehicles that are used for work errands. Hired and non-owned auto insurance can expand your business's coverage to include these non-company vehicles.

Remember, insurance needs vary depending on the nature of your business, so it is important to consult with a qualified insurance advisor to tailor a coverage plan that meets your specific needs. Ensuring that your business has adequate insurance coverage can help protect your assets and mitigate potential risks.

Ward and Smith's Insurance Counseling and Recovery Team is available to help your company strategize and assess its insurance needs.

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© 2024 Ward and Smith, P.A. For further information regarding the issues described above, please contact Adam M. Beaudoin or Olivia G. Lewis.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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