Most industries face similar challenges, but not all risks are created equal. A mild headache can easily escalate to an expensive blind spot. Below are three of the most common insurance blind spots to watch out for.
Blind Spot # 1: Misunderstanding of the scope of coverage
Policy terms vary widely and many months can pass between the day you purchase coverage and the day you actually experience a claim. As a result, there are always surprises. Here are some to avoid:
- Lower limits than expected. This surprise is especially common now due to the increase in construction costs and the high construction price.
- The co-insurance clause applies. If you are underinsured and your insurance has an insurance clause, it can only pay a percentage of what you expected.
- The cause of loss is not covered. This is especially common with water damage and flood-related losses.
- The policy has a coverage obligation rather than an instance-based coverage. If a claim is submitted long after the insurance was valid, this coverage provision determines which insurance pays and which coverage terms apply – your current insurer or your old insurer.
- Coverage applies to differential exposures than assumed. For example, you have purchased third-party cyber coverage instead of first-party cyber coverage — which means you have protection if your actions cause cyber losses to others but there is no cyber loss protection that your own business incurs.
It is important to know the details of each insurance policy to protect your business effectively.
Blind Spot # 2: Underestimating Exposures Created by Business Change
Growing companies change frequently. Maybe you have made a significant change, such as adding a building or launching a new product. Or you have made a minor change, such as hiring a new subcontractor or upgrading your software. Sometimes the exposure comes from a simple HR mandate, such as requiring masks or vaccines.
Each of these changes creates new exposures that may need to be addressed by adjusting your insurance or risk management practices. For example:
- If you rebuilt your building, you may need higher limits.
- If you launched a new product, you may need to adjust your product liability insurance.
- If you hired a subcontractor, you must address contractual liability exposures.
- If you upgraded your software, you may need to review your cyber policy.
- If you issue an HR mandate, you may need to check your EPLI policy and find out if your operator provides guidance on the issue in question. You may also need to consider the consequences of employee compensation.
These are just a handful of examples of thousands of possibilities. This is why it is important to review your coverage with an agent at least once a year and before making any significant changes to your business model.
Blind Spot # 3: Mismatching Risk and Policies
Business leaders need to know what each policy covers and make sure they have adequate coverage for each exposure. Common mistakes are:
- Believing that commercial public liability will cover professional liability exposures, or vice versa. Many companies should have both types of coverage.
- To believe that commercial car insurance is not needed if employees drive their own vehicles while performing their duties.
- Assumes that the general liability insurance covers the board's measures, when in fact manager and executive liability insurance is needed.
- Settles on generic business coverage instead of getting industry-specific coverage, tailored to your industry's unique exposures.
Do not make these mistakes! We invite you to review your coverage with an experienced business insurance broker at BNC. With a long experience of success, our BNC Insurance & Risk Advisors team looks forward to helping you!