6 Common Business Insurance Gaps (and How to Address Them)
Many business owners need multiple types of commercial insurance to fully protect their company. It’s therefore easy to assume that they have protection for every loss they may face. However, this common misconception can lead to costly consequences if left uncorrected.
Each business insurance policy covers its own set of risks and comes with different limitations and exclusions. Here are six common gaps in business insurance coverage and the solutions for addressing them.
Gap #1: My business is covered if my employee gets into an accident while driving their personal car for work-related activities.
Standard commercial auto insurance policies typically only cover company-owned vehicles. Therefore, your business may not be protected if your employee causes an accident while using their own car to visit clients or complete other job responsibilities.
Many employers believe the employee and their personal auto insurance are solely responsible for paying the damages. However, this is not fully accurate. If your employee is on the job when the accident occurs, your company may also be held responsible.
By purchasing hired and non-owned auto insurance, you can make sure your business is protected for these types of claims. It provides liability coverage when you or your employees drive vehicles that aren’t owned, leased, or rented by your company.
Gap #2: All employee-related lawsuits, including those involving unfair employment practices or hostile work environments, are covered by workers’ compensation.
Workers’ compensation insurance is designed to cover on-the-job accidents that result in an employee’s injury, illness, or death. It does not apply to other cases of harm, such as those arising from hostile or unfair employment practices. This includes:
- Breach of contract
- Discrimination
- Sexual harassment
- Violation of privacy
- Wage and hour disputes
- Wrongful termination or discipline
To protect against these types of claims, your organization needs employment practices liability insurance (EPLI). This policy helps pay your defense costs and any settlement or judgment, but they typically don’t cover legal fines or penalties.
Gap #3: If my business gets hacked, my general liability insurance will cover the costs of restoring the lost data and notifying customers.
Protecting the data of your company, employees, and customers is just as important as protecting your building and equipment. However, digital losses aren’t typically covered by general liability or commercial property insurance. This could leave your business responsible for all restoration and legal costs if sensitive data is stolen during a data breach.
Unsurprisingly, cyber insurance has become one of the most essential types of business insurance today. Depending on the specific coverage you purchase, it can help you:
- Restore your computer systems and data
- Replace your lost income
- Conduct investigations
- Notify customers
- Manage public relations
- Pay legal fees and defense costs
Cyber insurance is not a one-size-fits-all solution. It’s important to have coverage that addresses the specific risks of your business or organization. A Bearingstar Consultant can help you evaluate your options.
Gap #4: My commercial property insurance pays to repair or replace my equipment if it suddenly stops working.
In general, insurance isn’t designed to cover equipment breakdowns, whether they’re caused by a mechanical failure, power surge, or wear and tear. Standard commercial property insurance only steps in if your equipment is damaged in a covered event, such as a fire, tornado, or break-in.
If your business relies on expensive machinery or equipment, then purchasing equipment breakdown insurance may be beneficial. It can protect you against costly repairs or replacements related to broken or faulty:
- Air conditioners
- Boilers and pressure vessels
- Computers and other technology
- Electrical systems
- Mechanical equipment
- Refrigerators and other appliances
Some policies may also cover your loss of income during downtime.
Gap #5: If a customer’s property is damaged while left with my business for repairs, storage, or servicing, my general liability insurance will pay for the replacement.
Although general liability insurance helps cover damage to others’ property, it generally doesn’t extend to customers’ property that is left in the “care, custody, or control” of your business. This includes when your business temporarily holds someone else’s belongings for some form of servicing, such as:
- Cleaning
- Maintenance
- Repairs
- Storage
- Transportation
Similarly, commercial property insurance only covers losses to your own property.
If you keep your customers’ clothing, computers, furniture, jewelry, pets, vehicles, or other belongings on your premises for any amount of time, then you may need bailee’s insurance (or bailee’s customer insurance). It can help pay the costs of repairing or replacing items that are damaged, lost, or stolen while left with your business.
Gap #6: My commercial property insurance covers my business equipment when it leaves the office.
In general, commercial property insurance only provides protection for equipment, tools, and technology that are kept at the address listed on the policy. Once these items leave the premises, they may not be covered for theft or damage. This includes:
- Laptops and tablets taken to off-site client meetings
- Tools used at job sites
- Equipment provided to remote employees
- Products transported in vehicles
Inland marine insurance can help protect your business gear that goes back and forth between locations or is stored elsewhere. If these items are stolen or damaged in a covered event, this type of coverage can help repair or replace them.
Is Your Business Properly Protected?
Your Bearingstar team is here to help you close the business insurance gaps that could leave you unprotected. By working with one of our Consultants, you can feel confident in the coverage you carry.
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