Business owner policies: Why your clients sometimes neglect their risks
As an insurance agent that helps small-to-medium business owners (SMBs) handle their risks, you know there’s a plethora of “what if” situations that can keep a business owner up at night. So why do some entrepreneurs and even long-time owners sometimes ignore their risks when it comes to business owner policy renewal time?
Business owners typically think in big picture: “Here’s where I am now, here’s where I want to be this time next year.” Details and fine print often aren’t their forte. They’re also frequently pressed for time, wearing many hats for 12 or so hours per day. Consequently, they may not have a clear picture of just what coverage they DO have – and DON’T have.
Plus, they want to keep cash reserves available to spend on what will make them money – short-term and long-term. Risks and “what-ifs”, on the other hand, are ethereal, with the probability of an event quite low, they think. Consequently, some business owners (typically smaller ones) pick and choose when it comes to covering their risks.
As their agent, we recommend you work with them, ahead of renewal time, to ensure they have a thorough understanding as to what their business owner policy (BOP) covers and what is excluded. Endorsements, updates, and added coverage may be necessary as circumstances change.
Below is a list of various types of coverages your client may want to consider including in their business owner policy, as you explain how they can help protect both their company and them against harmful claims. Arrowhead not only offers a BOP but also Advantage Package, a more customized package that handles most of these risks; additional coverages may be warranted, depending on the industry segment.
What’s included in an Arrowhead business owner policy
Property. Your client needs to know they have coverage not only for the physical building, but exterior signs, computers, inventory, tools and equipment and more. Specific industry segments such as retail or contractors have risks all their own – and Arrowhead offers tailored coverage for many segments, including construction contractors, retail, wholesale and manufacturing. Other segments for which we offer specific coverage include medical, dental, professional, financial, real estate, restaurant and grocery.
Commercial Auto. Fledgling business owners are convinced they don’t need commercial auto coverage. After all, their business owns no vehicles. Remind them that if employees drive their own vehicles on company business, a commercial auto policy is needed.
Business interruption. Fires, mudslides, earthquakes, tornadoes – if the worst happens, your client’s property is covered so that they can repair or rebuild quickly. But what happens in the meantime, when their business remains closed and no cash is flowing in? Business interruption or business income insurance helps cover loss of income after a disaster, yet a national study shows that only 35 percent of small business owners have business interruption insurance. Arrowhead’s BOP covers your client for 90 days after the loss event. And our new Quake Assist Program provides California business owners with business interruption insurance after an earthquake – even if their business suffered no property damage. Find out more here.
Cyber Liability. According to the 2018 State of SMB Cybersecurity Report, cyber hackers have breached half of the 28 million small businesses in the U.S. Many business owners have no idea which half they’re in. These facts are even more sobering: According to Thoughtreach.com, small businesses pay more than triple the cost for cyber fraud than larger businesses; nearly 60 percent of small operations go out of business within six months of a cyber attack. It’s a good idea to review specific cyber risks with your client to ensure adequate coverage, and more importantly, what steps they can take to protect their operation from hackers. Again, cyber coverage is included in Arrowhead BOP and Package.
Employee Practices Liability. EPLI defends your client against claims of sexual harassment, discrimination, wrongful termination and other lawsuits initiated by an employee. With the increased attention to #MeToo, business owners are wise to consider adding EPLI to their insurance package.
Employee Dishonesty. While this is typically not a problem in a small mom-and-pop shop, but the larger the business gets, the more exposure there is. This coverage protects the business owner from financial loss due to fraudulent activities of their employees, whether from theft of money or other property.
Additional coverage your client may need
Pollution Liability. If your client’s business runs the risk of polluting the environment by hazardous materials, this is a coverage you may want to explore. Pollution insurance covers costs for restoration and cleanup plus liability for injuries or death caused by pollution. There are several types of policies: Premises Pollution Liability protects insureds from pollution losses related to property that they own, rent or occupy. Third-party losses are covered by Contractors Pollution Liability (for builders or contractors). There’s also specific coverage for truckers hauling hazardous materials.
Key person life insurance. Most small-to-medium businesses (SMBs) depend heavily on just a handful of employees who are essential to their business. What happens if that key person leaves, becomes ill or dies? If one or two key employees are so crucial to your client’s operation that their absence could cause a business shutdown, this additional policy names their business as the beneficiary and can help business owners deal with the loss while a replacement is found. A recent study showed that while 71 percent say they are very dependent on one or two key people for their success and viability, only 22 percent have key person life insurance.
If renewals are coming up soon, it’s a good idea to start with an analysis of your clients’ current business owner policy, to ensure they’re well-positioned for growth in 2019 and beyond.
Learn more about Arrowhead Core Commercial: BOP and Package
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