Owning a small business comes with risk — not just the possibility that sales will fall flat or your products won’t fly, but the risk of damage, disaster, lawsuits, power outages, and more. For example, 43 percent of small business owners have been threatened with or involved in a civil lawsuit, and more than 70 percent of data breaches occur at businesses with fewer than 100 employees. While these events are rare, they come at such a high cost that they could spell the end of your business — unless you have the right coverage.
But what is the “right coverage”? There’s no single answer, as different businesses and industries are exposed to different kinds of risk. But there are a handful of gaps in coverage that are commonly overlooked. Here, are five of these often-neglected areas and how to address them.
1. Business Interruption
Property insurance can help your business recover from physical damages after a fire, storm, or theft. However, how would your business pay bills and employees if it were unable to operate and generate income while it recovers? If a covered loss forces your business to cease operations, business interruption insurance can replace lost income and cover other expenses until it is back up and running. This coverage is typically included as part of a business owner’s policy, but confirm your business is covered for an appropriate timeframe and amount.
2. Cyber Insurance
Most businesses handle some sort of data — on operations, customers, and more. If you collect client information, you are responsible for protecting it from theft or exposure. Cyber insurance can help protect your business if you suffer a data breach, by covering expenses for you to notify affected individuals, provide credit monitoring or identity theft restoration services, hire computer forensic experts, and retain a public relations firm for damage control. Insurance can also cover legal expenses, judgments, or settlements related to claims or lawsuits brought against you.
3. Equipment Breakdown
Your business policy covers your property — particularly your office, furniture, and inventory — if it is stolen or damaged. However, what happens if your mission-critical equipment fails due to a power surge or other mechanical issue? Whether you depend on cranes, cameras, manufacturing machinery, computers, or cash registers, make sure you have adequate equipment breakdown coverage. This insurance coverage goes beyond repair or replacement and can even cover lost income if you need to temporarily shut down, extra expenses to continue running your business, or the lost value of spoiled merchandise.
4. Employment Practices Liability
Even though you strive to create a good work environment, your business could at some point face an employment-related lawsuit. Employment practices liability insurance can help protect your business against claims filed by employees for reasons such as hiring practices, wrongful termination, harassment, or discrimination. Insurance helps cover defense costs and any damages if you are held liable.
The standard limit for general liability and commercial auto policies is $1 million. However, this coverage amount may not be enough if your business is involved in a large claim or lawsuit. Umbrella insurance provides additional coverage over your existing auto and general liability policies and can help protect your business in the event of a large loss.
The above gaps are just a few ways that your coverage might be falling short. If you’re unsure whether your current policy covers these areas, reach out to your independent insurance agent to learn more. Your agent should have a good understanding of your industry and your needs and can help make sure your business is covered — no matter what occurs.
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