10 Types of Liability Insurance Every Small Business Should Consider

Liability Insurance is the Bedrock of a Small Businesses Shield of Protection

Liability Insurance is a way businesses can go about protecting itself from liabilities the business faces that are beyond the funds the business has on hand to cover. General Liability is required by law for most businesses in most states, but this is usually not the only type of liability insurance coverage a business should secure. Partnering with an experienced insurance professional with whom you trust is the first step to properly protecting a small business. This professional can help advise a business owner just what types of risks they face and just what types of insurance policies they should secure. Here are 10 types of liability insurance coverage every small business owner should consider securing.

Small Business Liability Insurance Coverage

General Liability Insurance Coverage

General Liability Insurance is required by law in most states and protects a business from lawsuits, bodily injury, property damage, personal injury and completed work. Two components are included in general liability insurance. Those two components are public and product liability. Public liability protects a business from third-parties filing suit against a business. The suit can be for something as simple as the third party slipped and fell in your store. No matter how trivial the suit is, it can amount to an enormous legal bill to protect the reputation of a business. Product liability protects a business for products or completed work. When a business makes or sells a product, the business is responsible for what happens with those products. It is important to remember product liability does not provide coverage for claims of defective or faulty design alone unless that defect causes injury or damage.

Professional Liability Insurance

Professional Liability Insurance Coverage is also frequently referred to as Errors and Omissions, E&O, or Medical Malpractice. Professional Liability covers a business for financial losses suffered by third-parties due to professional advice given by the insured. The types of professionals who need this type of coverage include: Accountants, Attorneys, Real Estate Brokers, Consultants, Physicians, Architects, and Engineers. A Professional Liability Insurance Policy does not cover bodily injury or property damage, these claims are usually covered by a general liability policy.

Cyber Liability Insurance Coverage

Cyber Liability Insurance is a type of liability that protects a business from the liability the business faces to third parties for a data breach that occurs within the organization. Cyber Liability Insurance covers the costs associated with the liability of a claim or suit related to a data breach, but it does not cover the first party damages to the business.

Dram Shop Liability Insurance

Dram Shop Insurance Coverage applies to businesses that sell and serve alcohol. A Dram Shop Liability Insurance covers a business for personal injury caused by an intoxicated customer. Dram Shop Liability grew from laws passed dealing with the actions of intoxicated patrons who were served when the business knew the patron was severely intoxicated. According to Vernet v. Serrano-Torres, 566 F.3d 254 (1st Cir. P.R. 2009), it was held that the theory of dram-shop liability has been described as one where a bar or tavern may be liable for the wrongful or injurious actions of a patron, if it served alcohol to that patron after it knew, or should have known, that the patron was already intoxicated.

Directors and Officers Liability Insurance is a type of liability insurance that is paid out to the officers and directors of a company or organization, as reimbursement for losses or advancement for defense costs in the event an insured faces a lawsuit as a result of alleged wrongful acts in the officers or directors capacity as a leader of the organization. Directors and Officers of a corporation or a non-profit may be liable for damages if they damage the organization in breach of their legal duty, if they mix personal and business assets, or if they fail to disclose any and all conflicts of interest.

Employer Liability Insurance Coverage

Employer Liability Insurance is an extremely important part of every businesses workers compensation insurance. Workers’ compensation pays a workers medical costs and some lost wages if they are hurt while on the job. If an employee feels their workers compensation benefit has not provided them enough, they can sue a business for damages. Some of those damages and the legal fees associated with those suits are covered under an employer liability insurance policy.

Product Liability Insurance

Product Liability Insurance Coverage protects a business from lawsuits that result from injuries, illnesses, or property damage linked to a product made by a business. These damages include manufacturing error, faulty design, malfunctions, and even misuse. This applies to manufactured products no matter if they are simple or complex.

Umbrella Liability Insurance Coverage

An Umbrella Insurance Policy is a type of coverage that sits on top of other existing policies. When there is a covered loss and the limits of that policy are met, the Umbrella Policy kicks in to cover additional costs up to the limits of the Umbrella Policy. They key part of this policy to understand is that the claim causing the loss has to be a covered loss. An Umbrella Insurance Policy does not cover additional losses that are not covered. The policy only kicks in when the limits of an existing policy are met.

Employment Practices Liability Insurance

Employment Practices Liability Insurance (EPLI) can protect a business in the event the business faces a lawsuits related to hiring, employing, and terminating employees. EPLI can protect a business when someone files a claim due to misconduct or violation of labor laws. These lawsuits could include claims of employee discrimination, wrongful termination, discrimination (age, racial, gender), breach of contract, sexual harrassment, or emotional distress.

Business Owner’s Policy (BOP)

Businesses can package all of the necessary liability policies in to a Business Owner’s Policy (BOP). A BOP includes several different policies.  They are usually designed for a specific industry because a carriers uses historical claims data to know which types of claims are common for businesses within a particular industry. BOP’s can be altered to meet the needs of a business and the level of risk a business owner is willing to take and most times carriers will offer a discount for buying multiple policies in one package.

3 Types of Liability Insurance Every Technology Company Should Have?

General, Professional, and Cyber Liability Insurance

Technology Companies have enormous risks. Those risks depend upon whether the business sells or services technology products. Some businesses store data about the businesses customers. Other businesses create technology that other businesses use to store the data of those customers. No matter what type of risk a business faces, there are three types of liability insurance all technology companies should secure. Those policies are General, Professional, and Cyber Liability Insurance.

Technology Liability Insurance

General Liability Insurance

General Liability Insurance for Small Business is the most important type of insurance policy a company can secure.  General Liability Insurance helps policyholders from the third party risks associated with lawsuits and other types of claims. Those claims include bodily injury and property damage that is caused by direct or indirect actions of the insured. For most businesses a general liability claim can be for something as simple as a customer slipping on wet floors inside a restaurant or when when a product sold breaks and causes an injury. For technology companies, General Liability Insurance will cover legal expenses when a business is sued for customer injuries, property damage, and slander. For many within the insurance industry, general liability insurance is referred to as the first line of defense for a business. It should not be the only coverage a business secures.

Professional Liability Insurance

Professional Liability Insurance is also referred to as Errors and Omissions Insurance. Professional Liability Insurance is coverage for professional businesses that give expert advice or provide technology services for a fee. The coverage prevents businesses from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in a civil lawsuit.

Here are five types of claims that are commonly covered by a Professional Liability Insurance Policy:

  • Breach of Contract: Breach of Contract that occurs when one or both parties do not live up to a contract that was previously agreed upon.
  • Fraud: Fraud occurs when one party intentionally lies or deceives for financial or personal gain.
  • Negligence: Negligence occurs when one party fails to use reasonable care that results in damage or harm to another person, business, or organization.
  • Breach of Warranty: Breach of Promise occurs when a person or business promises something to a customer in a warranty, and the business is unable to keep the promise made by the product or contract.
  • Misrepresentation: Misrepresentation occurs when a person or business makes a false claim to convince another person or party into a contract.

Cyber Liability Insurance

Cyber Liability Insurance covers the insureds liability for damages that result from a data breach. It does not cover immediate response costs that a business faces after a data breach. A Cyber Liability Insurance Policy is a type of insurance that protects businesses that sell and service technology. A data breach can result from something as small as an employees laptop being stolen while going to the bathroom at a coffee shop, but it can also result from an employee clicking on a phishing email. Data breaches are no longer just a problem for bug businesses. Both the Target and Home Depot Data Breaches started by hackers first accessing the computer systems of a small business who were partners with the bigger business. As most enterprise level business take cyber security more seriously, this is becoming a much more common way for businesses to become victims of a data breach.

3 Types of Cyber Insurance Every Business Should Have

What if my business does not deal with computers.  Does that mean I really don’t need Cyber Liability Insurance?  What if I am the only person in my business who uses a computer.  Doesn’t that mean I don’t face all that much risk?  Let’s say I might need Cyber Insurance, but what kind and how much?

Do any of these statements sound familiar? If so, you definitely need Cyber Liability Insurance. The term Cyber Liability Insurance is used pretty generally because cyber security is such a young sector and the data about the risks are changing very rapidly.  Business owners and insurance companies are still having trouble determining who is at risk and how much risk those businesses actually face. Just because this is a new type of insurance coverage does not diminish the importance it can have for protecting your business.

Cyber Liability Insurance

Many business owners think a data breach can only occur to a big multi-national corporation. For the big data breaches that make the news, this is certainly true, but the truth is most data breach first start out with small mom and pop businesses. These mom and pop businesses are first hacked with the hackers intention of gaining access to a much larger database.  This usually occurs through carious types of vendor partnerships. In the case of Target and Home Depot both of these breaches were first accessed by a much smaller business partner, who was hacked.  For this reason it is immensely important for you to talk with an experienced independent insurance agent about all the risks your business faces.

The three main types of Cyber Liability Insurance Coverage are Cyber Security, Cyber Liability and Technology Errors and Omissions Insurance. The first two deal with risks relating to a Data Breach. The third deals with companies that provide technology services and products.

Cyber Security

Cyber Security Insurance is also known as Privacy Notification and Crisis Management Expense Insurance.  This coverage includes coverage for first party damage to you and your business. This coverage does not protect your business from damage done to third parties. Cyber Security Insurance deals specifically with the immediate response costs associated with a data breach. In many cases it is required by law to find out how the breach occurred, notify those affected and provide credit monitoring services for one year.

Examples of costs included in Cyber Security Coverage include:

  • hiring a forensics expert to determine the cause of the breach, suggest measures to secure the site and prevent future breaches

  • hiring a public relations agency to assist in dealing with the crisis

  • setting up a post-breach call center

  • notifying affected individuals whose personally identifiable information (PII) has been compromised

  • monitoring these individuals’ credit (usually for 1 year)

  • paying the costs to “restore” stolen identities as a result of a data breach (e.g., expenses of notifying banks and credit card companies)

Cyber Liability

Cyber Liability Insurance, also termed Information Security and Privacy Insurance, covers the insured’s liability for damages resulting from a data breach. It does not cover expenses that deal with the immediate response cost. This type of insurance protects businesses which sell products and services directly on the internet.  Also, it protects businesses which collect data within its internal electronic network. The most common forms of data breach involve personal or financial information like credit card numbers, bank account information, social security numbers, health information, trade secrets or intellectual property.

The types of situations where this information are accessed include:

  • An employee’s car is broken into and a business laptop is stolen.

  • An email containing sensitive customer information is sent to the wrong person.

  • Important paperwork, like a credit application, is taken during a break-in.

  • Failure to timely disclose a data breach.

Technology Errors and Omissions

Technology Errors and Omissions Insurance, also referred to as Professional Liability or E&O, is a form of liability coverage that protects businesses who provide or sell technology services and products. This coverage prevents businesses from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in a civil lawsuit. This can include business who sell and service computer products, but it can also include graphic designers and advertising agencies who create digital content that can harm a company’s reputation. It covers computer programmers who may create faulty code for a website that causes that business to mail products to the wrong addresses.

Cyber Liability Insurance is a new and emerging part of the insurance industry and it is not going anywhere. These risks are only going to become stronger as more and more business operate online. Before too long Cyber Security Insurance will be a normal part of businesses insurance policy just like workers compensation Insurance and general liability Insurance are today. Now is the time to consider if and how much cyber insurance your business needs.

5 businesses that need Data Breach Insurance

Insurance to protect a business in the instance it has a data breach is becoming much more common.  This risk is only going to grow stronger as more and more information is stored digitally.  There are three main policies a company can secure, Cyber Security, Cyber Liability and Technology Errors and Omissions Insurance.  The first two coverages are typically sold together and the third is sold to specialized technology companies. Not all small businesses will need Technology Errors and Omissions Insurance.

Data Breach Insurance

Cyber Security Insurance

Cyber Security Insurance is also known as Privacy Notification and Crisis Management Expense Insurance.  Cybersecurity insurance is designed to protect eh damages to you and your business.  It can mitigate losses from a variety of cyber incidents, including data breaches, business interruption, and network damage. A robust cybersecurity insurance market could help reduce the number of successful cyber attacks

Cyber Liability Coverage

Also termed, Information Security and Privacy Insurance, Cyber Liability Insurance covers the insured’s liability for damages to third parties resulting from a data breach. It does not cover expenses that deal with the immediate response.  This type of insurance protects businesses which sell products and services directly on the internet.  Also, it protects businesses which collect data within its internal electronic network.

Technology Errors and Omissions Coverage

Technology Errors and Omissions Insurance (also known as Professional Liability Insurance or E&O) is a form of liability insurance that helps protect businesses providing all types of technology services and products.  This coverage prevents businesses from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in a civil lawsuit.

Consider the impact to your business if:

  • A software glitch causes a client to lose important data.
  • A flawed program installation keeps a client from receiving orders.
  • Missing code prevents a customer from booking reservations.

Costly mistakes can happen, even to people with the best training and years of experience. It’s human nature. That’s why Technology Errors and Omissions Insurance is essential to protect your business.  Agents at Technology Insurance Shop.com have the industry insight to help tailor coverage to your individualized needs.

Get the best answers to Cyber Security Insurance questions at MyInsuranceQuestion.com

 

Medical/Dental Offices

Medical Dental Offices store just about every bit of a client’s personal sensitive information.  This can include the customers date of birth or social security number, their credit card and bank account numbers, or even their sensitive medical information.  Protecting your business from the potential of this falling in to the wrong hands is extremely important for the long term success of any business.

Law Offices

Lawyers have a legal obligation to keep every bit of information they receive confidential.  When and if this information is made public it can have extremely drastic effects to the clients a law firm is representing.  Cyber security, cyber liability are needed for all law firms and depending upon the scope of the business, some law firms may also need technology errors and omissions coverage.  Speaking long and honestly with a trusted independent insurance agent can help determine the risks your law firm faces and what type of coverage you need.

Accounting Firms

Accounting Firms store clients most sensitive financial information. The information that they have is some of the most valuable information a cyber-criminal can get access to.  For this reason, it is extremely important to protect your accounting firm with cyber security and cyber liability insurance coverage.

Architecture and Engineering Firms

Architecture and Engineering Firms have access to the plans of new and existing businesses. If this information falls in to the hands of cyber criminals or the client’s competitors, the impact can be extreme.  These firms are one of the few businesses that need all three types of insurance related to data breaches. Cyber liability will cover your liability to third parties, cyber security will help with the damages to you and your business and technology errors and omissions coverage will help protect you from problems with technology expertise and advice your business may give.

Retail Businesses

Retail businesses are one of the most common places for cyber criminals to access a victim’s sensitive financial information.  As more and more purchases are made with a card instead of with cold-hard cash, retail establishments are a prime target for cyber criminals. Criminals use techniques as simple as a skimming machine at an atm or a gas station pay at the pump location.  Once the information is accessed it is commonly sold on the black market for other criminals to create fake debit and credit cards for access to the victims hacked accounts.

5 coverages every Non-profit business should have.

The Non-profit Industry is a very wide industry that encompasses a large amount of different types of organizations.  Some businesses simply operate a soup kitchen and only offer meals to those in need. Others offer medical coverage and still others offer construction services for those in need of housing. Each type of mission brings its own unique risks.  That is why it is important for non-profit managers to partner with insurance agents who have knowledge in many different industries and agents who partner with a large amount of carriers. This can help the agent find the non-profit quotes from numerous carriers and will allow them to get your nonprofit more complete coverage and usually at lower rates on premium.

non-profit workers compensation insuranceA lot of insurance carriers have restricted coverage for non-profit and charitable organizations due to a large amount of historical claims and their potential exposure from volunteers serving these organizations. A few carriers have taken a different approach to non-profits and created programs designed specifically to the unique needs of these businesses.  Below is a list of six coverages most non-profits will need.

General Liability

General Liability Insurance covers you and your organization from damages done to third parties as a result of the actions of your organization. These can be bodily injury claims and property damage to anyone who is not you or your employee.

Workers’ Compensation

non-profit-workers-compWorkers’ comp differs from General Liability because it protects your business from being liable to injuries that occur to your employees. It is frequently referred to as the ‘Exclusive Remedy”. That is because it will pay for employee medical costs, disabilities, and lost wages related to on-the-job injuries and accidents. Your organization will benefit from this policy by having the security that you will not be sued by your employees for accidents that occur as a part of your normal operations.

Commercial Auto

Commercial auto insurance for your vehicles is an important aspect of any business insurance program. This coverage provides protection against physical damage and bodily injury resulting from car accidents involving you or your employees. Most coverages also provide some protection from theft and vandalism.  Your organization does not have to own any vehicles to need some form of commercial auto coverage. For example, one of the most often overlooked business insurance coverage is Hired and Non-Owned Auto. Almost every business will occasionally utilize a personal, or non-owned vehicle for work related tasks. For example, your organization has an office staff member make trips to the bank to make a deposit of donations. Another example might be sending an employee to the restaurant to pick up food for volunteers. Every time someone uses a vehicle not owned by the non-profit to perform a business related function, the organization is at risk.

Cyber Liability

Most non-profit organizations think they are not at risk of a data breach. Many may think, I am a small organization with not much money, why would anyone bother to hack my organization. That is exactly what two small business owners thought when two of the largest data breaches in history occurred. Both the Home Depot and Target data breaches occurred by hackers first accessing a small business and then that small business had a vendor partnership with the larger business and that is how the hackers gained access.  If you store any information about donors or have a partnership with another organization, you could be at risk of a breach. Most cyber insurance plans can be added to a (BOP) at minimal cost to your organization.

Commercial Property

business-property-valuation-for-commercial-insuranceCommercial property is needed if you own property no matter the size of the premise. This will cover all property, including things like desks, chairs and anything physically attached to the building (i.e. shelvings, cabinets, etc.). Property coverage does not cover some specialized equipment like printers, computers or other office equipment. Coverage for this type of property would be covered under and Inland Marine Insurance Policy. These policies can easily be paired together under what is called a Business Owners Package (BOP). It is usually a good idea to ask your agent to quote a BOP because carriers are more likely to give your organization a discount on premium if you are carrying more than one coverage from them.

Owners and Officer’s

Owners and officer’s coverage might be the most important and frequently overlooked coverage for most non-profit organizations. The people who sit on your board are usually giving their time and expertise for free. Most just believe in you or believe in the mission of the organization. The last thing you want is for something to go wrong with your organization and them be liable for the actions of the organization.

liability-insurance-for-small-businesses Owners and Officers Coverage is for defense costs and damages (awards and settlements) arising out of wrongful act allegations and lawsuits brought against an organization’s board of directors and/or officers. Securing this coverage allows your officers to sit on your board and comfortably know they are not going to be liable for the actions of the organization.

Talk with your agent.

In today’s business world, time is of the essence for all business owners. When purchasing something for their business, many business owners want it done fast and cheap. They may have an inclination to rush through the buying purchase or to only focus on price. In many instances this may be wise, because their time is more valuable running the business than trying to save on buying whatever is needed for that business. When it comes to purchasing commercial insurance this is not a good idea. In this instances it is crucial for business owners to take the necessary time to have a long honest conversation with their insurance agent.

In conversations I have with agents in the insurance field, they all say rushing through the buying process is a mistake far too many business owners make. This is where a little time on the front end may cost the business owner some time away from their business, but on the back side it can save their business hundreds if not thousands of dollars when a claim does occur. During these conversations the agents are typically trying to get as much information as possible about the daily operations of your business. They understand business owners may be shopping around to more than one agency and that their time is valuable, but rushing through this process can cause your business to be under-insured or to pay too much in premium.

These problems frequently come about because business owners do not inform their agent what exactly the business does and what the business does not do as a part of their daily operations. Insurance companies are in the business of analyzing risk. It is in their best interests to assume more risk rather than less. They can only assume the risks of your business based on the information you provide them with. If you do not provide them with the enough information they frequently will assume more risk, which costs more in premium.

In most industries there are numerous industry classification codes. In most states these classification codes are determined by the National Council on Compensation Insurance (NCCI).  These classification codes separate businesses by the type of work they do or do not partake in. Take landscaping as a prime example. There are at least a half a dozen class codes for lawn care and landscaping based upon the daily operations of your business. The two most common NCCI classification codes for the landscaping industry are 9102 and 0042. 9102 is designated for lawn care or maintenance of existing lawns, where 0042 is designed for businesses that install lawns and beds. The second class code is more dangerous and has a higher premium. If you rush your agent through the quoting process, they may place you in the wrong classification code. This can cause your business to end up paying far more in premium than is necessary. These mistakes frequently get fixed during the end of term audit, but even when they do your business has still paid more in premium than was necessary. That means there is cash-flow your business could use tied up in unnecessary insurance premium.

On top of tying up cash in premium, another problem exists that a good insurance agent can help your business with. The problem they can help your business with is to understand what exactly is and is not covered under your different insurance policies. This can help you fill in coverage where gaps might exist. This is where an agent can help you determine if you need a coverage like Business Loss of Income Coverage or Data Breach Insurance. 

Business loss of income coverage is a policy that is a type of commercial property insurance coverage that kicks in when a business suffers additional loss of income suffered when damage to its premises causes a slowdown or suspension of its operations.  The damage has to be the result of a covered loss. Take for instance if your building experiences a fire. Your commercial property insurance will cover to repair the damaged building, but it will not cover your business for lost revenue while you have to be closed for repairs. This is where business loss of insurance coverage kicks in. Many businesses who fail to secure this coverage do not survive when an occurrence happens.

Data breach is another coverage that is becoming more and more necessary. Many business owners feel they are too small or do not deal with computers or customer information enough to need this coverage. Take a commercial cleaning company for example. They have 5-15 employees and clean 5 office buildings and one retail store at night while the businesses are closed. Their employees only use a cell phone and never interact with a computer. Their business owner thinks they would never need something as advanced as data breach coverage. But what if you clean the offices of a bank and an employee of the bank leaves  a post-it note on their desk with the username and password for the internal system. If one of your employees finds this they could get into the system and access the financial records of the banks customers. That is a need for data breach coverage. Two of the largest data breaches in history, Target and Home Depot, were started by hackers first accessing a small business who was a partner of the larger business that got hacked. You do not have to be a big company nor do you have to store lots of personal information in order to be a target for criminals.

All of these and other problems can easily be prevented by taking the time in the first place to speak long and honestly with your independent insurance agent. They can help you understand what risks your business because not only do they interact with business all the time when they are purchasing insurance, but they also frequently interact with business owners when the unfortunate accident occurs. From that experience they can help you prepare for when dooms day comes for your business. If you take this time to properly protect your business it can be the difference between closing your doors for a short time and closing your doors forever.

Business Loss of Income Coverage

Business Loss of Income Coverage is an addition to a Commercial General Liability Policy.  It can be added to a Business Owners Policy (BOP) for as little as a few hundred dollars, depending on the size of your business. It covers the loss of income from damage to your building that results in a slow down or suspension in business. For many business owners; this coverage may not seem all that necessary, but when an incident occurs this coverage can many times be the difference between a business reopening or closing for good.

The most basic way a need for this coverage occurs is when a building catches fire. When this happens, the general liability and commercial property policies will cover a businesses expenses to repair the building to its previous condition. These policies will not pay to cover loss of revenue if your business is slow or suspended for an extended time. This can be thousands of dollars depending on how long your business is closed.

As a business owner it is important to realize that a Business Loss of Income Policy only kicks in if the loss is a covered loss. Meaning that if the loss occurs from something like an earthquake or flood; and the business does not have special coverage for that peril, than the business loss of income policy does not kick in. This is important to note in areas that have natural disaster risks. Examples of this are Florida for hurricanes, California for earthquakes, Missouri for tornadoes, everywhere for flood risks. Another risk that is associated with Business Loss of Income is Data Breach. When a data breach occurs it very likely can cause you to be closed for a certain amount of time while the data breach is dealt with. If you have Data breach Coverage in place than this will be a covered peril. If not the Business Loss of Income will not kick in and you are liable for the additional loss of revenue.

When a business owner decides to add this coverage the important thing to consider is how much risk you are willing to take and determine if that risk is worth the amount you save in premium. For most businesses this coverage can be added for a few hundred dollars. If it is added to a business owners package it can be even less. In most cases this cost is well worth the benefit you get when an occurrence does happen. In most instances, when a devastating accident occurs and a business does not have this coverage, the chances of them ever reopening are far less than if they have this coverage.