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4 years ago · by · 0 comments

Is My Business Underinsured?

If you own a business, then there are two particularly scary statistics that you need to be well aware of regarding natural disasters and insurance. The first is that 75 percent of American businesses are presently underinsured. The second is that 40 percent of all businesses in the country never reopen their doors following a local natural disaster. If either of these percentages apply to your business, then you are in the uncomfortable position of being an accident just waiting to happen.

These twin statistics mean that many business owners along with their employees are dangerously vulnerable to either natural disasters or financial emergencies. To some people, natural disasters may seem like an unavoidable setback to be endured. Yet for nearly half of businesses, they prove to be fatal to the ongoing success of the businesses in the area. In fact that 40 percent statistic only tells half the tale.

More than 90 percent of businesses completely fail in two years or less of being the victim of a natural disaster. Yet the answer is fairly simple and straight forward. Many of these companies could have remained open even after the disasters if only they had possessed adequate and specifically tailored insurance. In the rest of this article, we will look at three critical areas in which business insurance is all too often lacking or insufficient.

You Lack Sufficient Insurance Coverage to Aid With Rebuilding, Re-staffing, and Re-stocking Costs After A Natural Disaster

It certainly pays to prepare for the worst where natural disasters are concerned. Only those who know the precise amount of money which they need to entirely replace and restart their business can apply for the optimal amount of insurance coverage. Every other business is in the unenviable position of having to cover the remaining costs out of their own pockets. With a great number of companies, having a policy called BPP Building and Personal Property Coverage will be sufficient to be protected. These BPP policies will safeguard you in the event of loss or damage to the building property and the personal business property. It will also cover any other personal property of other people that are involved in the business.

You Lack Sufficient Professional Liability Insurance to Protect Your Company From Lawsuits

Not every business carries professional liability insurance. This policy also called E&O Errors and Omissions insurance will safeguard your company from any mistakes that your employees or you could make working professionally. Some businesses find such insurance more critical than others, in particular those giving advice which might substantially affect the life of a client. Good examples of this advice-giving role include financial advisers, lawyers, and any companies that either maintain important client information or help the customers to engage in sensitive decisions.

Deciding the right amount of Errors and Omissions insurance is not simple. You would want to research any settlements or lawsuits that involved companies much like yours within the industry. In point of fact, you want to be certain that the whole cost of the possible settlement or lawsuit (legal costs included) gets covered. It is not at all desirable to have to go into your own personal or corporate funds in order to fend off an upset customer from your company.

For those firms that do not give away life altering financial advice or legal advice to clients, you could still maintain a significant amount of clients’ personal information. This could land you in serious trouble should your corporate files get hacked. This is more the case should such stolen files later be used in financial crimes such as identity theft. Even though this might not be at all your fault, your business would be the one sued for them. It does not much matter if you take precautions to safeguard the data of your customer’s in advance either. This is why all types of companies should seriously contemplate these E&O policies, especially if they hold on to customer records, and particularly highly private or confidential information.

You Did Not Sufficiently or Recently Update Your Coverage to Take Into Consideration Your Growing Business

For any company that has existed for in excess of a couple of years, your costs have probably gone up in most categories. This would include phone bills, utilities, and IT and infrastructure costs. The majority of goods and services rise in price on average more than three percent every year alongside inflation (and some costs rise more than this).

It is also a fact that with a growing business, you will have more at stake that you can lose when there is a disaster. This explains why you must periodically update your insurance policy to match your shifting needs for more coverage. For a company that runs out of a house and has only a single employee, $50,000 total insurance could be sufficient. When the operation expands to be one that employees from 10 to 15 individuals, then you will definitely want to maintain from five to ten times as much coverage.

In Conclusion

Remember that a business underinsured is a ticking time bomb. Sooner or later, your vulnerability will be exposed. Sadly a business underinsured is in the uncomfortable majority of companies today. They are the ones that fail first after a natural disaster strikes.


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Cincinnati Family and
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910 Loveland Madeira Road,
Loveland, OH 45140

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