Commercial Insurance Tool Kit
Today I’m sharing three areas most businesses are exposed in. If you address these areas and purchase the insurance to cover your exposure there, you will have addressed your risk in most cases.
These three areas are comprehensive, and may not all apply to your business, but it could give you a general overview and a good starting point to discuss with your broker what your insurance needs are.
- Property Exposure
First, you have exposure through property you own or control. This could include buildings and their contents, machinery, equipment, as well as vehicles and damage to vehicles. Money could also be at risk, if someone could steal money from you. This specific cover is called “Fidelity cover”. All these areas are for assets you own or control, and could result in losses or damages you could be held responsible for.
- Third Party Liability
Where other people are involved, this is called Third Party Liability and generally this area concerns you being held liable by someone else because you were negligent, or you’re accused of being negligent. The third party could be visitors to your property or customers (depending on what your business entails). If you’re negligent towards a third party, they can sue you, and you would have to pay for your defense in court, and they can also be awarded judgment against you. The liability cover serves to mitigate the exposure from third parties there. This includes general liability as the most common form, but can also include professional liability, liquor liability (if you sell liquor) and it can include many other areas depending on your situation.
- Net Income
The final area of exposure I want to share with you is Net Income. What threats are there to your income? If you’re in retail and your retail location is destroyed, your insurer pays out, but it may take you 12 months to rebuild your building. If it takes you 12 months, you’ve lost 12 months of income. With the COVID-19 pandemic, many individuals lost their jobs due to retrenchments. Insurance could replenish lost income and can also provide extra expense to help you regain that income. That might mean renting a building at a different location, notifying your customers where you are and other expenses you might incur in your bid to make an income again and would cost more because your building has been destroyed. This cover is called the “Business Interruption” section of your commercial policy.
Make sure that the insured amount is adequate to be able to cover a combination of these losses, and always have a contingency plan in place, to reduce your exposure. The thing about insurance is, you never feel like paying for it until you need it! And you never know when you will, so protect yourself and your loved ones.