Recent hurricanes in the southeastern states have brought a wave of devastation to homeowners and businesses alike. Not only have livelihoods been put at risk, many are finding that insurance gaps are leaving them without the support they need to get back up and running. This reality has business owners across the country asking, “Am I covered?”
It’s not uncommon for small to midsize businesses to carry outdated or inadequate insurance coverages. This makes ongoing insurance assessments crucial for identifying gaps in coverage and better prepare for unforeseen risks – weather related and beyond.
Why Insurance Coverage Assessment is Critical for Small Businesses
Small businesses face a unique risk in that they often don’t have access to the same resources that larger corporations do. Whether it’s access to reserve capital or to a robust consulting team that manages risk assessment, both can have a significant impact on whether or not a business survives a catastrophic event – and we aren’t just talking about natural disasters.
Common Insurance Gaps That Leave Small Businesses Vulnerable
Recent weather-related claims have been dominating headlines, but there are a number of common insurance coverages that small businesses don’t consider because they don’t know they need them. Here are a few of the most common insurance gaps we see.
Property Damage
There are a number of reasons why certain types of property damage claims may not be covered. Most property policies exclude a number of specific events, including:
- Natural disasters (hurricanes, earthquakes, etc)
- Acts of war or terrorism
- Routine wear and tear
- Pollution or contamination
It’s important to understand the limitations of your existing policies and then consult with a professional about additional coverages designed specifically for your type of business, business location, or other factors.
Business Interruption
Something small businesses don’t always consider is Business Interruption Insurance. This coverage is designed to support businesses who experience an interruption in operations due to a covered claim. Business Interruptions helps cover lost revenue due to forced closures and other covered expenses such as employee salaries as well as fixed operational expenses.
Cybersecurity
In today’s digital economy, it’s nearly impossible to conduct business without a digital infrastructure. This makes small businesses especially vulnerable to cyber attacks, as most don’t have extensive cyber risk teams to implement and manage robust security measures. Data breaches, such as malware, phishing, ransomware, and fund transfer fraud can be devastating and hard to recover from without the proper protections in place.
Identifying Coverage Gaps
As the year is quickly coming to an end, now is a good time for business owners to assess the coverage they do have and work with an insurance professional to help identify needs for improvement.
Step 1: Review Your Current Policies
While this process can be time consuming, it’s important business owners dedicate time to gather and review current insurance policies. Discuss your business operations with an insurance professional so they can help you understand your exposures and what can be done to reduce them. This process will help build a better understanding of what your needs are, what coverages are available, and what your policy limitations are..
Step 2: Understand Industry- and Location-Specific Risks
Every industry is different, so understanding the unique insurance needs of a specific industry or niche is key. An ecommerce business may have a focus on cyber coverage while a personal trainer will need a more robust general liability and personal injury policy, just as a business based in Florida will have different needs than one based in Arizona.
Step 3: Find the Right Insurance Partner
Not all insurance providers are created equal. There is no shortage of options, so be sure to research those who best understand your business niche and provide the level of service that best fits your needs.
Step 4: Consider the Full Scope of Risks
The right insurance partner should help business owners consider the full scope of risks. Think beyond just general liability insurance and consider employee safety, business continuity and more.
Protecting Your Business and Your Future
Regardless of business size or industry, finding the right insurance policies is critical for maintaining business stability. And this isn’t just a one-time project to check off your list. As a business owner, conducting comprehensive insurance assessments on a regular basis allows you to address the evolving risk profile of your industry and provide peace of mind in knowing the future of your business is secure.
Chris Van Leeuwen, CIC, Vice President of Professional Development at Insurance Canopy.
Natural disaster stock image by Bilanol/Shutterstock