What the COVID-19 Pandemic Has Done to Business Insurance and How to Adapt to It
As a business owner, or entrepreneur you raise capital to jumpstart your business and sustain its operations until it is stable enough to steadily rake in return of investment (ROI). You contend with balance sheets to know whether accumulated expenses align with acquired profit margins.
If done right, accounting for your assets and liabilities can ensure that your entrepreneurial pursuit stays as viable as you had envisioned in the business plan you designed before launching.
However, no matter how perfect your business plan and how foolproof your bookkeeping is, you cannot be entirely spared from roadblocks and challenges that may compromise your business’s financial status. That’s because risks are part and parcel of any business. And that’s where commercial insurance comes in.
Commercial insurance protects your business from unanticipated events such as property theft and damage, customer and employee injuries, and client lawsuits, among others.
Types of Business Insurance
Commercial insurance products run the gamut. Here are the usual suspects.
- Property insurance – This coverage protects equipment, inventory, furniture, and other relevant physical assets against theft, fire, or storm. Remember that property insurance usually excludes calamitous events like earthquakes and floods. For those, you might need a separate policy.
- Product liability insurance – If you’re in the business of consumer products, you need this coverage in the event of a lawsuit filed due to damages suffered by a customer after contact with your product.
- Professional liability insurance – This is akin to product liability insurance. It protects your business from potential lawsuits filed by a client due to your negligence or failure to perform. The policy you receive will be customized to your needs based on the kind of business you do.
- Workers’ compensation insurance – This coverage protects you against financial claims due to the death and disability of workers or the medical expenses they incurred over a work-related injury.
- Business interruption insurance – Business operations may get disrupted due to a catastrophic event. If this happens, you may lose income. With business interruption insurance, you could recoup those losses. This coverage is most relevant to businesses operating in physical spaces, such as retail shops.
Tips for Purchasing Business Insurance
Commercial insurance is not going to be cheap. Get behind the following recommendations to get your money’s worth.
- Comply with required insurance – There’s no getting around policies required by the law, your clients, lenders, or your industry. For example, depending on which state your business operates, you are legally mandated to have workers’ compensation insurance. Meanwhile, if you lease a commercial space you intend to design yourself, your landlord might require a general liability policy that may outline strict adherence to lot line requirements.
- Understand industry risks – For voluntary policies, the key is to determine what risks your business is prone to. For instance, if your retail store is in a place that’s prone to wildfires, it might be in your best interest to buy a policy against that natural threat.
- Understand how insurance rates are computed – Factors such as the size of your business, the extent of assets you want to be protected, and the location of your business, will affect the rates of insurance premiums. Account for these variables when shopping for policies.
- Mind the fine print – Before signing an insurance contract, make sure to understand the ins and out of the policy. If possible, consult with a legal expert.
Pandemic Effects on the Insurance Sector and How to Adapt as a Policyholder
The digitalization of the insurance industry has been accelerated by the pandemic. Because of the mobility challenges posed by COVID-19, insurers had to fast-track service automation.
For policyholders, it is a welcome change to be able to have quicker transactions via paperless claims. However, this does not translate to ease of claims, especially in cases related to the pandemic.
Case in point: As of Aug. 24, 2021, policyholders had filed hundreds of lawsuits against denied claims for business interruption losses related to COVID-19.
Here we see insurers trying to protect their interests, pitting technicalities in their drafted policies against the interpretation of policyholders to avoid paying up.
In that regard, here are your possible claims under the business interruption policy.
- Direct physical loss – If a business property has been rendered uninhabitable due to COVID contamination, you may be able to apply for direct physical loss payment.
- Contingent business interruption – If the entity you depend on to operate suffered property damage that financially affected your business, you may be able to claim contingent business interruption.
- Specialized business interruptions – Peruse the clauses in your policy to see if specialized business interruptions apply to your coverage, to which global health scares might belong.
- Pandemic-specific coverage – You might want to look into this specialized policy if your business is prone to health scares that might happen in the future.
Some business insurance is mandated by law. Others you purchase at your discretion. Either way, what these financial products afford you is peace of mind.
And for a business owner, that could be priceless. After all, you often have a lot on your plate. You juggle a range of responsibilities. At the very least, you want the assurance that should things go wrong, your business is insured.
With that said, know the types of commercial insurance at your disposal. Make sure to avail of those you can’t and shouldn’t do without. And lastly, when the going gets tough, fight for the coverage you deserve.
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