In my storied tenure as a wealth advisor, I've often found that while businesses may thrive in their respective sectors, they often miss the mark in one essential domain: securing their assets against unforeseen challenges. Commercial insurance serves as a moat around your business empire, ensuring that it remains unscathed in turbulent times.
However, like all fortifications, a mere presence isn't enough; it must be impeccable. With that in mind, let's delve into some of the most common commercial insurance pitfalls, offering your company cautionary tales and prescriptive advice.
1. Overlooking Management Liability Protection
The Boardroom Blunder: A company's upper echelon makes decisions that shape its trajectory. While their intentions might be noble, there's always room for error. Without Directors and Officers (D&O) insurance and Employment Practices Liability Insurance (EPLI), your firm is precariously positioned susceptible to allegations ranging from misconduct to mismanagement.
Moreover, several nuances are often disregarded. For instance, merging the limits of D&O and EPLI might seem efficient but could quickly become a liability. Likewise, omitting third-party coverage in EPLI leaves your firm vulnerable, particularly when interacting with external stakeholders.
2. Underestimating Cybersecurity Perils
The Digital Dilemma: In our increasingly interconnected world, digital threats loom. Remote working has further amplified these risks, with dispersed teams potentially creating security loopholes. Irrespective of your firm's size, a cybersecurity breach could wreak havoc. The remedy isn't merely obtaining cybersecurity insurance but comprehending its contours and staying updated as digital landscapes evolve.
3. Neglecting Social Engineering Fraud Coverage
The Deceptive Detour: Social engineering fraud might sound futuristic, but it's a present menace. By manipulating human psychology, fraudsters can bypass even the most fortified systems. The aftermath? Financial losses that aren't covered under conventional crime or cyber policies.
4. Misjudging Liability Umbrella Limits
The Cascade Conundrum: While every entrepreneur operates optimistically, prudence dictates preparing for the worst. A sizeable liability claim could be just around the corner. A general liability policy offers primary defense, but what happens when that's exhausted? An umbrella policy fills this gap, and determining its limit is crucial to safeguarding your firm's future.
5. Disregarding Hired and Non-Owned Auto Coverage
The Mobile Misstep: Picture this – an employee, on a seemingly innocuous errand, using their vehicle, is embroiled in an accident. Without the right coverage, your company could be financially liable. This often-overlooked facet of insurance underscores the devil in the details.
Steering Your Ship Safely
Commercial insurance isn't merely a checkbox but a strategic imperative. As you build your empire, having a robust shield against unforeseen storms is pivotal. Engaging a seasoned insurance professional, one who understands both the macro and micro nuances is paramount. This isn't an area for shortcuts; it's an arena for diligence, foresight, and precision.
After all, as stewards of wealth, our job isn't just to create and multiply assets but to preserve and protect them against the vagaries of time and circumstance.
Note: The content of this blog has been adapted and reimagined from the VFO Inner Circle Special Report by John J. Bowen Jr.