This checklist describes the insurance required to cover a wide range of corporate risks.
In every country in the world companies are legally required to have a minimum level of insurance cover. It is also prudent to pay for some insurance beyond this basic level. Occasionally, forms of insurance have different names in different countries. This primer uses the British descriptions.
Perhaps the most important form of insurance is employers’ liability. This offers cover against bodily injury, illness, or disease suffered in the course of employment.
Public liability ensures that a company is able to pay damages for bodily injury, illness, disease, loss, or damage to property caused by the insured. Product liability covers damages arising from the supply of a defective product. This could include anything from power tools to computer software.
Professional indemnity is mandatory for certain occupations. It protects against legal action by clients claiming damages for what they see as negligent or bad services.
Business interruption insurance is increasingly popular. This provides compensation if, for example, your property is damaged in a way that disrupts your business activities. This may be on the basis of gross profit where a company is making or selling goods. Clubs and other businesses supplying a service may be covered on the basis of gross revenue.
Property and buildings insurance is a complex area with a number of variables. Basic cover will include damage arising, for instance, from fire, lightning, and gas explosions. Additional cover can include threats such malicious damage, flood, or leakage from sprinkler systems. So-called “all-risks” insurance will protect against most eventualities, but not wear and tear or mechanical breakdown.
Contents cover for business assets and equipment is also an area where insurance companies offer a number of different types of policy. Stock is normally covered at cost price, but equipment may be insured for replacement as new or taking into account deterioration. Theft following forcible entry is normally covered, but stealing by employees is generally excluded, although there are special policies for employee dishonesty.
Specific policies insure money lost or stolen from your premises or in transit to the bank. Goods in transit insurance protects against damage to stock carried in your own vehicles, by road hauliers, or by post. A recent addition to policies available protects against damage or consequential loss arising from acts of terrorism.
Many large insurers and brokers offer single policies covering the three main areas of commercial insurance: liabilities; business assets and equipment; and property and buildings. The advantage of this approach is that it should reduce the risk of overlaps or gaps in coverage, although it may be more economical to shop around for specialist policies.
Many organizations will also require other forms of insurance for: commercial vehicles and company cars; business travel; accident and sickness; and employee health. There are also more specialist requirements, such as marine cargo and engineering inspection.
Insurance brokers who specialize in covering commercial clients will be able to offer policies for all these areas.
Advantages and Disadvantages
It’s not really appropriate to talk of the advantages and disadvantages of taking out corporate insurance, as in many cases having insurance is compulsory.
Find a suitable broker who specializes in the type of insurance you need.
Check the terms. Not all insurers offer cover for the same thing.
Check the laws and regulations for your industry to learn which types of insurance are compulsory for your business.
Dos and Don’ts
Shop around to compare premiums and policies.
Don’t cut corners. It may be a false economy, and you could end up in court if someone brings a claim you do not have cover for.