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.

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

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.

Hotel Charges $127 for 3 Bottles of Water (and other reasons to read the fine print)

Photo Credit: Thrillist.com

Thrillist.com recently ran this article about a hotel charging a customer $127 (or £75 GBP) for 3 bottles of San Pellegrino during a business meeting at their hotel bar.

Apparently the charge was thanks to the hotel's absurdly high per-person minimum charge policy. Although high, the charge wasn't what bothered the patron enough to email the hotel to complain and to tweet about it, adding #ripoff. His real problem was the sneaky hidden charge. He says the server never notified him of the minimum charge:

“I have no issue if they have a minimum charge, but they need to make it clear. It is the lack of transparency that I have a problem with."

This got us to thinking about reading the fine print.

Most people skim through contracts and Terms of Service for apps (we're looking at you, Android), doctors offices, drawing entries, social media profiles, and yes - even insurance policies - without reading the fine print.

We get it - reading the fine print isn't fun, it's not entertaining, and with so much legal jargon thrown in there, sometimes it's downright headache-inducing to understand. However, by skimming these contracts, we open ourselves up to expensive mistakes. Today it might be $127 for a few bottles of sparkling water. Tomorrow, it might be finding out that theft isn't covered under your auto insurance policy.

I wrote a blog post on Auto Insurance: Dirty Secrets In Your Policy when this happened to a friend earlier this year. She'd unfortunately bought car insurance online, and the carrier's quick-quote site had failed to inform her of the fine print detailing this gap.

Purchasing insurance online seems like a fast, convenient way to speed up an otherwise unappealing task. But it begs the question - why is the lowest quote so cheap? You get what you pay for, and insurance is no different.

An independent insurance agent, like a website quote calculator, does the legwork for you - shopping different carriers for the best price. This is where they differ: an agent makes sure you're getting the best coverage for that price. Meaning? You still don't have to read all of the fine print if you don't want to … But someone that you trust has, and will sum it up for you. Because the worst time to find out that you've been paying a monthly premium for a policy that doesn't cover much is when you file a claim.

Check coverage before loss of power, utilities

Check your policy before you have utility loss.

Many of us can still remember the effects of Hurricane Ike in September 2008, when the storm caused damage across 11 states. Widespread winds with gusts to hurricane force caused one of the largest power outages in the history of the Midwest, with close to 4 million customers losing power.

Of course, widespread power outages can occur at any time. Whether you are a homeowner with a personal insurance policy or a business owner with a commercial policy, it is important to understand what coverages you may have available before a storm hits.

Homeowners

Most homeowner policies exclude damage caused by utility service failure. An exclusion means that any damage caused by utility service failure is not covered by the policy. However, some insurance companies provide coverage for loss of refrigerated property by endorsement (a policy addition) or under the Additional Coverage section of the homeowner policy.

Coverage is usually limited and provides reimbursement for loss of freezer and refrigerator contents. Your agent can answer questions about what your policy covers.

Business owners

A loss of utilities can be costly. Even if your building is not damaged by a storm, a power outage could cause you to close your doors and prevent you from serving your customers. Business interruption insurance is available, but is not standard to every commercial policy. It  can usually be added for a reasonable cost.

In addition, business interruption insurance may not cover losses from utility service outages. Again, depending on your policy, you may be able to purchase a limited amount of coverage as a coverage extension or through an endorsement to your policy.

Whether you’re a homeowner or business owner, avoid surprises by checking with your agent in advance to assure you have the necessary insurance coverage in the event of a utility outage.

Submitted by Bill Gregory for Cinncinnati Insurance Companies

The 7 Essential Business Insurance Policies:

Liability insurance protects your business
from third-party lawsuits

There are so many commercial insurance coverage options out there, it can feel confusing or overwhelming trying to sift through them to determine which are necessary for protecting your business. To help you, we’ve made a list of the seven insurance policies that every business owner should have, regardless of business type or size (and we’ve even outlines some additional coverage options that are smart add-ons, or even essentials, depending on the type of business you own).

Protecting your investment is one of the most important strategies for your success. Managing your risk is the best way to ensure that the inevitable mistakes that occur along the normal lines of doing business (schedule or shipment delays, accidents and injuries, damage to inventory) don’t compromise your business or your profits. The right insurance policies help safeguard your profits and your possessions.

If you’re just starting out, these business insurance basics are essential to your future success. If you own an existing business, you should already have these coverages to protect the profitability of the business you’re working so hard for.

Seven business insurance policies that you shouldn’t do without:

1. General Liability Insurance – This covers damage to persons or property caused by a business's product or premises (sometimes referred to as “slip and fall” insurance). Maybe the most important coverage you can get in our litigation-looped society, this can protect you against a wide range of lawsuits, from the postal worker who slips and falls in your parking lot to the consumer injured by your product. You need this type of coverage before you ever sell a single product or service. There are several different types of liability options that can be included in your policy depending on your business type, including general liability, product liability, liquor liability, advertising liability, on and off premises liability, and many others. Product liability, for instance, protects you if your business makes a product that could conceivably harm someone else. (Food and beverage related businesses that produce a consumable product need this type of coverage.
2. Commercial Property Insurance – Property insurance covers damage to your building and the items within it, including inventory, loss of income, and furniture/electronics. It

   

   Commercial Property Insurance protects
   your premises and the items inside it 

   also covers any improvements or customizations that you make as a tenant, if you rent your space.
3. Commercial Auto Insurance – This will cover collision and liability for the vehicles that are owned by you, your employees, and rented vehicles.
4. Workers Compensation – Bodily injury to yourself or your employees.  Whether you have one employee or a hundred, you need Workers Comp included in your policy. Workers Comp is a state required benefit that will help take care of medical become ill while working at your brewery. 
5. Excess Liability/Umbrella Insurance – An umbrella policy provides excess coverage over your already existing policies. It is a much more affordable way to increase your limits and extend your liability than increasing limits of every liability policy in your insurance plan.
6. Employment Practices Liability Insurance – Coverage for defense costs and damages related to various employment-related claims, including allegations of Wrongful Termination, Discrimination, Workplace Harassment and Retaliation deriving from the employer-employee relationship.
7. Crime – Protection against loss from crime covers employee theft, forgery and alteration, theft of money and securities, computer fraud, funds transfer fraud, and loss from accepting in good faith money orders and counterfeit money.   

Additional coverages to consider, based on your business needs:

• Data Compromise and Identity Theft Expense Coverage – Provides for certain expenses after a covered loss to help you respond and protect your good name. It also includes access to services to help you prepare for such events.

• Equipment Breakdown Coverage – Extends your property policy to cover loss to real and business personal property from the sudden and accidental breakdown of machinery and equipment used in your business.

• Supply Chain Insurance – A problem with your supply chain can cause major losses, from a problem with a key supplier to a temporary halt in production, unless your supply chain insurance policy kicks in and balances out your profits.

• Errors and Omissions Insurance – Also known as professional liability insurance or professional indemnity insurance, this is a form of liability insurance particularly important to service or advice-oriented businesses that protects you should you make a mistake or neglect to do something correctly or on time that causes your client money or harms their reputation. (A prime example would be a doctor's or dentist’s medical malpractice insurance, but this coverage is equally as necessary for a wedding photographer whose film gets damaged, or a printer whose machine breaks down in the middle of a big deadline.)

• Business Income Insurance. This is disability coverage for your business. This ensures you get paid if you lose income as a result of damage that temporarily shuts down or limits your business.

• Directors and Officers Liability – Financial coverage for defense costs and damages (awards and settlements) cause by allegations and lawsuits brought against an organizations’ board of directors and/or officers (and the decisions made by these individuals). This is more typical for publicly-traded companies and nonprofits, that have boards and/or multiple investors.

Rule of Thumb: Never settle for inadequate insurance for your business (or for yourself). If you started out with $200,000 in property insurance and your business has successfully grown worth of well more than half a million dollars, you need to update your coverage so that a fire, flood, theft or another misfortune won’t leave you at a destructive loss. It can be hard to imagine the worst happening when business is good, and hefty insurance premiums are low on your preferred expenditures list. But while a low quote may look good on paper, lesser coverage can make or break your business should an accident occur.

Shop Carefully: Insurance policies come in a wide variety with many different features, benefits, and prices.  Talk to an agent you trust and go over your policies with them so that you understand your coverage and its cost, and ensure you choose policies that adequately cover your business needs.

Pure Risk Solutions specializes in commercial insurance, assuring customized coverage related to your unique business. Our goal is to help protect your exposures at an affordable price, whether you are in the startup phase or want to review your existing policies to make sure your thriving business is protected the way it should be.

For specific questions related to your business, or for a free quote or policy review, reach out to me,  John Jacquat, at (303) 834-1001 or at  john@purerisksolutions.com.