The Two Best Ways To Protect Your Business

This month, you asked us: Where do you find that most businesses are under-insured? And why do you think they are?

The answer: Business Interruption + Cyber Liability.

Case In Point: Big cases of cyber hacking, like the Anthem hack,
exposed personal data on as many as 80 million records for current and former
customers and employees. The information accessed included names,
birthdays, Social Security numbers, street addresses, email addresses, and
employment information including income data. That’s 80 million people
the business is responsible to notify and provide protection for.
And the kicker? The risk isn't short term, like when a credit card
number is stolen. An attacker could sit on stolen information for years,
and you are liable just as long. 

Why? Yes, you do need it--and you really can afford it. Most small to midsize companies pass on these coverages because of added cost and a misunderstanding or underestimation of their need or risk. But consider this: Business Interruption and Cyber attacks are common, and can be financially crippling. Nearly four out of five -- 78% -- organizations experienced some sort of data breach in the past two years, and 71% of them failed because of it. Read our advice below on why it’s essential and why it really won’t cost you that much.

:|: Yes, you need Cyber Liability insurance. Target. Anthem. Sony. It seems that every week, a new story hits the media about a major hack. If you’re a small business owner, you may wonder: What would I if something like this were to happen to my company? How can I protect myself? Do I need cyber insurance?

The internet has made everyone vulnerable, the costs to fix an intrusion are very expensive, and coverage is inexpensive (in comparison), so it’s silly to take a risk. If you are a retailer that accepts credit card payments, you are open to cyber liability risk. Even if you don't, you probably have personal information from your employees and/or customers, and perhaps intellectual property from vendors.

What does the coverage buy you? It pays for out-of-pocket expenses after a breach, remediation costs, cost to notify impacted people, credit monitoring for those impacted, and identity theft resolution services should a theft occur. It can also cover public relations.

:|: Yes, you need Business Interruption insurance. Business interruption is likely to happen at some point during the lifetime of your business. The rising number of natural disasters (increasing from 400 to 600 major incidents annually, according to a recent survey from global insurer Allianz), makes this likelihood even greater.

Business Interruption is a very misunderstood coverage area. Most business owners assume that their standard Property policy covers them from loss. However, most standard Property policies cover only loss or damage to tangible items (i.e. equipment and inventory and your warehouse, office, or store), not lost profits if your business cannot operate (which an Interruption policy would cover).

Also, consider that your business is at risk when related businesses are affected by disaster. For instance, a fire at your credit card server’s processing center could take down your ability to accept payment, or flooding or a strike at a key manufacturing or delivery center could cause disruption to your supply chain. These events hurt your finances even though your facility may be undamaged. "Contingent business" insurance covers your lost profits in these disaster scenarios.

According to the Federal Government, statistics show that of all businesses involved in a major loss, 43% never trade again and 28% fail over the next three years. This statistic means only 29% survive and 71% fail following a business interruption event.

What does the coverage buy you? A Business Interruption policy covers lost revenue if your business has to temporarily shut down due to a disaster (whether to the supply chain or the business directly), payroll for your employees, expenses (i.e. electricity) and other costs while you’re preparing to reopen, and can be the deciding factor in whether your business thrives or fails.

Case In Point: Consider a disaster like Hurricane Sandy. Property policies cover damage to the structure and equipment listed on affected business policies (a good reminder as to why it’s so important to update your policy when you expand, purchase new equipment, etc.), but do NOT cover revenue lost while repairs were made or businesses found new locations. Businesses not covered by an Interruption policy would have to pay out of pocket to cover bills like mortgage and utilities (that do not quit following a disaster), employee payroll (or risk losing valuable, trained employees), and for temporary relocation during a rebuild. Covered businesses would have these expenses covered by their insurer.

How Much Do You Need? Calculating coverage needs and business worth is also a barrier to many companies. When there is a lack of understanding of the coverage, it is difficult for a business to set values to its worth, which is necessary to ensure the right coverage amount. For example, a study from the Chartered Institute of Loss Adjusters (CILA) in 2012 shows that 40% of all companies have declared values that are too low, and by as much as 45%!

To figure out your ideal coverage amount, you should envision how your business would be affected by a catastrophe (hurricane, fire, etc.). Consider all costs that you would continue to pay even if your business couldn’t operate (loan or lease payments and taxes). You may also need to keep workers on the payroll while you rebuild, so your insurance should reimburse you for their salaries.

:|: The Cost? You'll pay less for it than you'd expect. How much you need is dependent on the size of your business, your company’s balance sheet (for Business Interruption), and the type and amount of data your company manages (for Cyber Liability). A rider on a standard insurance policy may be sufficient for small companies, provided you do not process or store a large amount of sensitive information.

If a rider is sufficient for your business, Cyber Liability insurance can cost as little as $45 to $75 a year for $10,000 to $20,000 of coverage. Adding business interruption coverage and network security liability coverage could cost in the low hundreds per year. If you need a stand-alone policy, your premium cost will generally be at least $500, but more typically $750 and above. For larger businesses, this goes up, depending on the type of coverage you need.

:|: The Summary: Cyber Liability and Business Interruption are not part of your standard business insurance policy. Even if your policy has small amounts of these coverages as an enhancement, the amount of protection is not enough to really protect you.

• Business Interruption insurance can be the difference between staying in business or disappearing after a direct loss (i.e. fire, flood), or an indirect loss (i.e. your credit card server goes down for a day, your distributor isn’t able to make a delivery crucial to your business).
• Cyber coverage is too often built into another coverage on a policy, diluting the limits and reducing coverage. If your businesses uses a credit card vendor to accept payment or collects email addresses for a newsletter, you are open to cyber exposure – and should have a stand alone policy to protect your business and the costs that it could incur should your credit card vendor go offline, making you unable to accept payment (and therefore losing hours or days of income), or a hacker should steal your marketing lists or other Personally Identifiable Information about your clients.

Our advice: General coverage often isn’t enough to protect your business. Passing on these two added coverages can strike a fatal financial blow to your business.

Business Interruption and Cyber Liability are added protections your insurance company can tailor to the risks in your specific line of business. Believe us, your risk of the costs following a major loss (like a hack or business interruption) far outweigh the low cost of upfront premium coverage. 

Our goal is to help you avoid costly pitfalls associated with cyber or interruption breaches, and make sure that the financial health of your business is protected against accidents or catastrophes. Give us a call to review your policy and add the coverage you need.

Protecting your craft beverage equipment

Equipment breakdown coverage can protect your business
from the financial impact of an equipment loss.

While means and methods will vary, one item that all craft beverage manufacturers share is dependence on their equipment. That’s why it’s important to make sure you include equipment breakdown coverage as part of your insurance portfolio if you’re a craft brewer, distiller or winery
owner. Read more of this post

Whether a piece of metal gets into your grain and badly damages the rollers in your mill, a gear in your bottling line suddenly breaks, shutting down production, or something as simple as routine breakdown of a water heater or air conditioner occurs, Equipment Breakdown coverage protects your finances against breakdowns that are sudden and accidental.

Insurance Tip of the Week: ASK FOR DISCOUNTS

If you don't ask your carrier for discounts, they may not tell you they are available to you. 

Young And Single? You may pay more for car insurance than your young, married friends (as this Forbes article shows). As you get older, your rates go down naturally because insurance carriers view you as less of a risk. But you don't have to sit around waiting for your next birthday to reduce your premiums. Whether you are married or single, 20 years old or 60 years young, there are plenty of other discounts you may be eligible for. But (and here's the point) you have to ASK.

ASK YOUR AUTO INSURER ABOUT DISCOUNTS. If you don’t ask them about discounts, THEY MAY NOT TELL YOU THEY ARE THERE FOR YOU. Many of you have probably never asked, and assumed you automatically received any discounts you were eligible for. The answer to that is NO.

Common Discounts

If you have been with an auto insurance company for five years accident and ticket free, you are likely eligible for a good driver discount (but again, if you don’t ask, you may not get it). If your carrier won’t offer the discount to you, it may be time to shop around.

If you are not working, or work from home, and don’t drive your vehicle the average amount (typically 10,000 miles a year or more), make sure your insurer knows this and you may get a discount for low annual mileage. Same goes for keeping your vehicle in a garage, versus parked on the street.

These days, every dollar counts—so check ask about discounts, and see how much you could save, based on things like:

 > Vehicle Equipment (airbags, anti-theft system, daytime running lights, etc.)

 > Driving History & Habits

 > Driver's Education

 > Driver Affiliations (military, federal employee, memberships)

 > Customer Loyalty (multi-car, multi-policy)

Bundling your auto and home insurance policies can help, but sometimes not as much as you think, so the best answer to a better policy rate is this: SHOP AROUND, and when you find a policy that aligns with your coverage needs and your budget, get a letter from your carrier for your homeowners policy, auto policy, etc. that LOCKS IN that deductible for a set period. This is smart because often if an area, for example, has several storms causing extreme damage, their deductible or premium (or both) may automatically be increased to account for the increased risk to the insurer, without a big fancy invitation alerting you to these changes. Many of us are guilty of not reading the fine print. So, CHECK ON YOUR POLICY YEARLY. Do an annual review. Ask questions. Ask for discounts. And if you need help, give us a call.

303-834-1001

The top 5 reasons to promptly report a claim

Report a claim promptly to your insurer 
to make sure your coverage isn't affected.

Your insurance policy is merely a promise until you have a claim, but many people hesitate to report a claim to their insurer. Here are five reasons why you should promptly report a claim if you have an incident. Read more of this post

When in doubt? Ask us for advice on whether to submit a claim, and let us help you through the process.

Why your privately held business needs directors and officers insurance

D&O insurance protects your company and its board.

Every corporation relies on the guidance of its board of directors for success. Although lawsuits against larger, publicly traded companies receive the lion’s share of media attention, privately held corporations are also vulnerable to lawsuits by competitors, government agencies, creditors and employees. 

You can protect your hard-earned success by purchasing directors and officers insurance (D&O) coverage for your company. Read more of this post


by Tom Kelly for The Cincinnati Insurance Companies

Prevent Frozen Pipes in Your Home

A plumbing pipe in a friend's condo froze and burst recently, flooding two floors of an eight-story building, and leaving three and a half feet of standing water. Not only were the tenants whose condos were flooded displaced from their homes while repairs were made, their furniture and belongs were ruined.

[Fun fact for renters: your belongings are not covered under your landlord's insurance policy, even in cases of flooding caused by burst pipes. Watch out for a February blog article about renters insurance for tips on how to prevent this.]

We hear horror stories about frozen pipes and the damage they cause from homeowners and renters alike every year when the weather turns wintery. So we decided it would be helpful to share tips on how to prevent it from happening in the first place.

Frozen pipes are one of the most common causes of property damage when temperatures drop. A burst pipe can cost upwards of $5,000 in water damage, according to IBHS research.

Busted water pipes are a much bigger problem than you might imagine. According to State Farm Insurance, more than 250,000 homes are damaged annually by frozen or burst water pipes, ranking second only to hurricanes in terms of damage and repair costs. However, unlike hurricanes, frozen water pipes can be prevented.

Taking preventive measures before cold weather hits, such as keeping temperatures above 32 degrees (the freezing point for water), can prevent pipes from freezing, and the costly damage that goes with them. Most plumbers recommend keeping heat at 55 degrees when temperatures are frosty.

Homeowners - check out the tips and link below for tips on how to repair burst pipes and prevent them from freezing in the first place. Condo and apartment owners - pass this on to your board. Renters  share these tips with your landlord. Here are some simple precautions to follow:

Prevent Frozen Pipes

• Provide a reliable back-up power source to ensure continuous power to the building.
• Insulate all attic penetrations.
• Ensure proper seals on all doors and windows.
• Seal all wall cracks and penetrations, including domestic and fire protection lines, electrical conduit, other utility service line, etc.
• Install insulation and/or heat trace tape with a reliable power source on various wet sprinkler system piping. This includes main lines coming up from underground passing through a wall as well as sprinkler branch lines. 
• Place a monitored automatic excess flow switch on the main incoming domestic water line to provide early detection of a broken pipe or valve when the space is unoccupied.

Source: Insurance Institute for Business & Home Safety

For more information on how to prevent frozen pipes, and the pipes most at risk, click here.

  

NEW! Ask Us Anything: What you need to know about Cam Newton's car accident

(Todd Sumlin/AP/The Charlotte Observer)

Last month, we rolled out an Ask Us Anything column in our newsletter, so that you can send us your insurance "what ifs" and "how abouts," and we'll respond with advice and recommendations on how you can save money and protect all of your most important stuff…. All without having to ask your insurance carrier (who may note even hypothetical questions in your file. We know - sneaky!).

The first question is:  The news about  Cam Newton's car accident made me wonder what the repercussions will be for the driver who hit him. Were I to cause an accident and injure someone, famous or not, can you tell me the policy limits and coverage that I should have to protect me against injury, damage to vehicle, etc.

Our answer:  There’s really no short sweet answer to how much coverage a person should purchase. Some professionals will recommend analyzing your assets and purchasing liability limits that are of a similar value. I believe it is more complicated than that. The Cam Newton accident is a great example as to why. If the driver of this vehicle were found “At-Fault” and liable for the damages he caused, and Cam had been paralyzed (or just simply unable to perform his job any longer due to the accident), the at-fault individual would have been liable for millions of dollars. 

....Let’s see, Cam is 25 years old. In July 2011, NBC Sports posted that Cam Newton was signed to a $22 Million deal, meaning that's his market worth. That's a whole lot of money! Again, if the individual who caused the accident and injury had been found at-fault, and had he ended Newton’s career, he’d be bankrupt. Even if Cam only had to miss a few games, if those injuries cost the driver the salary Cam gets paid per game, that’s still a lot of money. In this case, both parties were lucky, with Cam being released from the hospital with only minor injuries. But it's best to protect yourself against any of these scenarios.

I’m of the belief and hope that it is rare for an insured person to sideline the career or someone like Cam Newton, Peyton Manning, or worse yet, Russell Wilson. That said, the insurance we purchase is there to protect us -- not only from everyone else on the road, but from ourselves and damages we may cause as well. 

So, back to the question at hand: how much coverage is the right amount of coverage?  This is a risk tolerance and a cost analysis question that needs to be answered. What is your net worth, how much “risk” do you want to assume, and how much do you want to pay for the “risk transfer” (insurance jargon - blah!). The bottom line is, it’s a personal preference, and one that takes some thoughtful consideration. The majority of insurance buyers out there will spend 10 times longer determining how to get the most bang for their buck shopping for their next 65” curved LED TV than considering their coverage options. (Check this one out. Pretty sweet. I found that in 4.58 seconds…. BTW, did you know that’s Cam’s 40 yard dash time?)  ;o)

I hope this is somewhat helpful. For further clarification or help determining your personal net worth and the amount of risk you are able to assume vs. transfer to your insurance policy, give me a call. 

 

Have a question yourself? Send us your insurance questions and we’ll share our advice.