Most small and mid-sized businesses are aware of the importance of having business insurance but often simply opt for general property and liability insurance and call it a day. While these policies cover most of the basics, there may be gaps in your insurance that can leave your business exposed to risk and financial loss. Here are some of the most common potential gaps we see in business coverage and an overview of more specialized policies and endorsements that may help you protect your business and help your business recover after a covered loss. Keep in mind that individual policies can vary widely, so it’s always important to review your coverage options with your agent or broker.
1. Am I covered if an employee sues my business?
As an employer, you know that there are certain rules and regulations you need to follow for how you treat your employees, and what you can reasonably expect from them. These days, with more people working from home, and added health and safety considerations for those in the workplace, it can be more difficult than ever to know exactly the right approach—potentially increasing the risk of an employee suing, based on claims of:
- Sexual harassment
- Discrimination
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
Company management is also at risk—directors and officers can be personally sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing the company.
Consult your insurance agent or broker about adding these coverages to help close the potential gaps:
- Employment Practices Liability Insurance – to protect against lawsuits filed by employees who claim their legal rights as employees have been violated.
- Directors & Officers – to protect your company’s officers and directors if they are personally sued for acts or omissions committed in their capacity as corporate officers or directors.
2. Is my business covered if it’s sued by a customer for professional negligence?
When you provide professional services, there is a chance that a customer may claim you failed to complete the services in a satisfactory manner, made a mistake, or provided incorrect information that resulted in a financial loss for them. While you’d hope that you could work things out amicably, that’s not always the case. If your business is sued by a customer for either actual or alleged financial damage, appropriate professional errors and omissions insurance may help cover the costs.
Consider adding Professional Liability or Errors and Omissions (E&O) insurance to help protect against claims directly related to your professional services.
3. If my business is damaged by a fire or break-in and must close temporarily, are my operating expenses insured?
If your business suffers a physical loss and you need to close part or all of your operation, you may lose revenue, plus could incur additional expenses, such as:
- Mortgage, rent, and lease payments
- Employee payroll
- Taxes and loan payments
- Relocation costs if your business must move due to physical damage to the premises
To help cover that potential gap following a covered property loss, ask your insurance representative about adding business interruption insurance to your property policy .
4. Am I covered if one of my employees accidently infects my company’s computer system with malware?
You may have heard about data breaches or cyberattacks on large companies. But cybercriminals are not focusing solely on big money. They are looking for vulnerabilities, and small and mid-sized businesses who use outside IT services or have limited IT resources may be more exposed than they realize. If you have employees, your risk is even higher, because each employee is another potential gateway for cybercriminals to try and get through.
Consider procuring a commercial cyber policy to help provide solutions and services for privacy breaches, network security, incident response, and media liability.
5. Is my business insured if our mechanical system breaks down?
Advances in technology have led many businesses to rely on increasingly sophisticated equipment. If your business is one of them, consider what would happen if your mechanical or electrical system broke down, and the resulting impact to your business. You could lose valuable resources needed to make the products you plan to sell.
To help close this potential gap, consider equipment breakdown insurance to provide the funds and resources to get you back up and running quickly after a covered loss.
6. Is my business covered if an employee gets in an accident while delivering products to a customer?
Accidents happen. Even if your employees have been trained and drive safely, you can’t always account for the behavior of other drivers. Therefore, any time you or an employee drives as part of the job, your business is at risk. While you may think that your personal auto policy will cover you, that may not be the case. Certain types of vehicles that are clearly designed for business use, like food trucks, limousines, or tow trucks, are likely not covered under a personal auto policy.
A commercial auto policy can help protect vehicles owned by a business; and some may include coverage for individually owned vehicles used regularly for that business (other than commuting to work).
7. Is my business covered if it is damaged by a flood?
Floods can happen, anytime and anywhere – indeed, Chubb’s claim history indicates that over 50% of claim dollars paid for flood-related losses come from properties located outside of a designated high-risk flood zone. Typical commercial property policies do not insure the peril of flood. Therefore, if your property is damaged by flood, you could be stuck with the bills to replace damaged property, rebuild to code, and remove debris, on top of operating costs and loss of income during the restoration period.
Since the typical commercial property insurance policy does not include flood coverage, ask your agent or broker about commercial flood insurance options available from private insurers or the federal government’s National Flood Insurance Program (NFIP).
8. Is my business covered if my employees are injured while they are overseas?
If you or your employees travel abroad as part of your business, you may want to make sure you have appropriate coverage that extends beyond U.S. borders. For example, how could you help an employee who had a medical emergency while outside the country, lost a passport, or needed to get out of a country due to a political uprising?
To help cover this potential gap, consider multinational travel accident insurance – to provide resources for international travel, including emergency medical, cash and document replacement, local country reports and travel alerts, and more.
Regardless of the type of business you run, it may be smart to talk to your independent insurance agent or broker to make sure your business is appropriately insured so that you can focus on keeping your business running smoothly, even if you experience a loss.
This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.
The claim scenarios described here are hypothetical and are intended to show the types of situations that may result in claims. These scenarios are not based on actual claims and should not be compared to an actual claim. Whether or to what extent a particular loss is covered depends on the facts and circumstances of the loss, the terms and conditions of the policy as issued and applicable law.
Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall's Mill Road, Whitehouse Station, NJ 08889-1600.
Insights & Resources
We keep you informed – and your business protected – with these helpful articles.
