Company Insurance: Can You Put a Price on Peace of Mind?
You run a shipping company. The truck transporting the goods from point A to point B gets into a car accident. The driver’s injured, the goods are destroyed and the shipment is delayed. The financial costs of all of this will come out of your own pocket, and could result in a real decline in profit or loss in revenue used to keep your business alive. Having company insurance saves you from this. Company insurance is what protects a company from any losses or damage caused during the regular course of business whether it is related to damaged property, legal risks or employee-related accidents. There are several types of insurance specified for each aspect of business including property, legal liabilities and the security of employees. Companies then assess their need for company insurance based on the risks associated with their usual business activities.
The difference between company insurance and life insurance is that one is dedicated to the survival of your business and the other ensures financial stability for your family upon your death. While there are major differences between the two types of insurance company insurance goes hand in hand with any other type of insurance in order to offer you your own peace of mind.
Knowing that whatever life throws at you, you will not be suffering from debt and will not be severely struggling financially is the way to go about it. While paying for company insurance may be pricey, it should not be overlooked. If you wish for your business to survive in the long run, insurance will make that happen.
Know Your Risks and Create Your Risk Profile
A risk profile is an assessment of a person or a company’s potential to take risks, as well as the risks they would typically be exposed to. A risk profile tends to affect the decision making of the company and is viewed by other organization when making investment decisions, and insurance companies when deciding their insurance policies. A risk profile determines the level of risk the corporation is willing to accept and how the costs will affect decision-making strategies of the company.
The severity of the risks your company is exposed to will determine the type of company insurance you need to focus on, and the level of insurance you need. To assess the risk severity, keep two things in mind your risk probability and your risk impact. The risk probability is the chance of a risk occurring, and the risk impact is the consequence that the risk would result in. You can mathematically calculate these factors separately, and the product of the risk impact and the risk probability will give you the risk severity which you can use to acquire the appropriate company insurance.
What Is Assigned Risk?
In countries like the United States, there is an important term to keep in mind, and it is Assigned Risk. An assigned risk is one that is assigned by state insurance law that requires an insurance company to provide coverage for. It is not simple to find coverage for an assigned risk, therefore insurance companies join forces to provide full coverage. State insurance regulators are usually the ones dealing with this set up. Based on a company’s risk profile, insurance companies make the choice of who they want to provide coverage for and who they, don’t.
Types of Insurance
The insurance you provide for your company can be split up into different categories to protect different aspects of your business operations. Company insurance should protect you and your earnings from damages to your equipment, products or employees, so investing in various company insurance types will not come as a loss in the long run. According to the Forbes’ article on ‘13 Types of Insurance a Small Business Owner Should Have’, here are some of the ones you should consider:
- General Liability Insurance; this type of insurance is essential and it protects the company from any physical or property damage your business activities, products or employees causes to a third party.
- Property Insurance: if you own the office or building you work from, or have any personal property in the building (eg. computers, inventory, office equipment) property company insurance will ensure your protection in the case of a fire, vandalism, smoke or theft.
- Commercial Auto Insurance: this type of insurance protects your vehicles and auto-mobiles. Whether you run a shipping company or have a bus transportation service for your employees, this type of insurance should cover any damage done to the vehicles carries employees, equipment or products.
- Worker’s Compensation: as a business owner, you should always consider this type of company insurance. Workers compensation protects workers who are injured while on the job. When offering this type of compensation for workers, they are provided with medical benefits in exchange for their right to sue the company owner for the damages suffered.
- Professional Liability Insurance: also known as Errors and Omissions Insurance, this type of company insurance will protect your company against damages for the failure of other professional firms. This type of protection will provide coverage from lawyers, accountants etc.
- Homeowner’s Insurance: although this is not directly company insurance, but it is a type of insurance you should definitely consider. Homeowner’s insurance provides coverage for your home for damages to it or inside it, due to actions of others or yourself.
- Life Insurance: are you worried that your loved ones will be financially oppressed after your death? Life insurance will protect you and your business in the case you die. Life insurance means that the insurer will pay an amount of money to your family upon your death.
Alongside this list, Entrepreneur has its own list titled, ‘7 Types of Insurance You Need to Protect Your Business’. From that article we can identify some types of company insurance that weren’t mentioned previously. For example:
- Product Liability Insurance: if your business takes part in the manufacturing of a product, product liability insurance is extremely essential. This type of insurance will protect you form cases against you for an incident caused by your product. Product Liability Insurance will protect you from lawsuits of that nature, as each type of insurance is customized to fit each product.
- Business Interruption Insurance: if your business were to be interrupted by any sort of uncontrollable event like natural disasters, you need a way to make up for lost time. For example, if there was an intense snow storm and your employees were unable to come to work, your business will suffer from lost income. Business Interruption Insurance is mostly appropriate to companies that need a physical location to operate.
Let’s Talk Bank…
Now that you know you need company insurance, you’re probably wondering how much this is going to cost you. To answer that question, you need to take into account the type of business you run and the risk probability and severity.
Given that you’re aware of the different types of company insurance, you will probably need more than one separately. However, sometimes this insurance policies will be packed into a business owner’s policy.
Company insurance policies change from a business to the next, so your company insurance will be tailored specially to you and the nature of your business operations. For example, some businesses will require more worker’s compensation instead of commercial auto insurance, some might need higher property insurance. This all depends on the risks in each aspect of your business and the likelihood of it occurring.
The type of company insurance you select for your business will also vary from location to another. In areas where the likelihood were extreme weather conditions such as snow or sand storms will affect your daily course of action, you might rely on business interruption insurance.
In terms of finance, there is really no average cost for company insurance because of the different variations of it. Yet, whether you are a large or small business, we can estimate some numbers. For small business, you might need to pay $500-$1000 p`er year for general liability insurance, as your business gets larger that number may increase up to $15,000 per year. If you’re business involves a lot of physical labor by your employees, that increases the probability of risk, consequently your price for company insurance per year will increase.
More about BOP
A Business Owner’s Package combines several types of insurance coverages into one package. BOPs usually include, property damage insurance, general liability insurance, medical insurance, cyber liability and others.
The price of a BOP varies depending on the coverage utilized and the aspects of the business being protected. A typical BOP could range from $500 to $3500 per year. But do keep in mind that the pricing of it would probably be less than buying the insurances separately.
Having a BOP is ideal if you own and run a small to medium sized business, as it provides the basic types of company insurance and doesn’t worry about the rare risks that your business could face in comparison to larger businesses. In fact, there are some characteristics that your business should have to be eligible for a BOP. To be eligible for a BOP means that you will probably gain the most out of it as well. The requirements for eligibility vary from each BOP providers, but generally these are some of the characteristics that are usually considered:
- Class of business (small to medium businesses)
- Location of business operations
- Size of business’s primary location
According to the Insurance Information Institute you will need separate insurance policies to cover the safety of your vehicles and your employees, as BOPs do not include:
- Professional liability
- Auto insurance
- Worker’s compensation
- Health and disability insurance
Nationwide is the #1 Small Business Insurer in the United States, they have experience protecting over 500,000 small business. Using the BOP from Nationwide as an example, you can take a look at what BOPs usually include and the specifics of the package. Their BOP includes:
- Property damage insurance
- General liability insurance
- Personal and advertising injury insurance C
- Bodily injury and medical payments insurance
- Others property damage insurance
- Business interruption insurance
Their additional coverage options include:
- Professional liability insurance
- Cyber liability insurance
- Employment practices insurance
- Accounts receivable insurance
Nationwide also has industry specific BOPs, for example:
- Auto BOP: for auto service businesses
- Retail BOP: for retail stores
- Food BOP: for food service establishments
- Service BOP: for business that perform services
- Office BOP: for businesses with owned or leased office space
The Middlemen: Insurance Agents
Whether you own a large corporation or a small business, it’s important to utilize the skills and knowledge of someone who’s actively in the insurance market. Insurance agents will help you find the best deals and make the best decisions for the sake of your business’ long term survival.
An insurance agent will assess your risk management and apply the most effective and beneficial cost saving strategies to protect your business. They will provide you with a package that ensures all the types of insurance you will need. Instead of having to visit a range of insurance companies and assess prices, deals and trustworthiness, an insurance agent will get that job done for you.
More about Business Interruption Insurance
As a business owner, you want to make the most out of your business all the time. You’re going to invest all your time and effort to make sure everything runs smoothly, you can take control over your machines, and enforce rules on your employees, but you can’t change the weather, literally. Sometimes, natural events occur and stops your usual business operations. If not weather conditions, it may be any unexpected event that disrupts your business flow.
There is a special type of company insurance that caters to the losses you face when events as such occur. The reason behind these losses is because, no matter what happens you are still expected to pay employee salaries, rent or you may even have repair expenses. But how are you to come up with the money to compensate for it? That is the job of business interruption insurance
Business interruption insurance is a type of company insurance that pays for your business expenses, when you are unable to due to an unexpected event. Instead of having to pause your business, this type of company insurance will allow you to keep operating your business by paying for things such as:
- Rent and utilities
- Moving locations temporarily
- Lost revenue
- Repair expenses
- Health insurance
Business interruption insurance will protect you from unexpected events, but not all. There are some exclusions from the insurance policy such as:
- Glass Breakage
- Utility Interruption
Where to Get Business Interruption Insurance
The Balance has created a list of insurance companies that offer business interruption insurance from which you can take your pick:
- Erie Insurance
- State Farm
- The Hartford
- The Hanover Insurance Group
- CNA Insurance
Top Insurance Companies in the World
In the company insurance game, there are a few key players. Insurance companies make a lot of money off of their clients in return for their safety and peace of mind. You may choose to buy an insurance package from the following companies keeping in mind that since they are well known their services will not dissatisfy you. The following companies are some of the leading life insurance, company insurance and auto insurance in the world, but are not mentioned in any specific order.
- AXA: you’ve probably heard this name at some point. AXA is one of the world’s leading insurance companies with their specialities being property and casualty insurance, life insurance, saving and asset management. Dating back to 1817, several companies joined together to create AXA, now their headquarters are based in Paris with branches across the Middle East, Africa, South America and most of the world’s populated regions.
- MetLife: MetLife will offer you insurance for almost anything. Their company insurance products are categorized into the size and type of business so you can find the one best suited for your company. Insurance is also provided for individual employees and they also offer retirement plans.
- Zurich Insurance Group: if the name doesn’t give it away, Zurich Insurance Group is based in Switzerland, and was founded in 1872. Now, this insurance company is operating in more than 170 countries providing many types of company insurance including, farmers insurance. They provide insurance for businesses of all sizes, from small local businesses to multinational corporations.
- AllState: AllState insurance company is provides a wide variety of company insurance packages. Their products are suitable for almost any type of business and they work in creating business policies specially for your business’s needs. If you’re looking for business interruption insurance AllState is also the place to go. AllState is also known for their car insurance with opportunities for discounts and saving.
- China Life Insurance: China Life Insurance Company is based in Mainland China and it is own of the largest state-owned insurance companies. Their company insurance plans range amongst, asset management, property and casualty, investment holdings and overseas operations.
- Assicurazioni Generali: the Generali group is one of the leading insurance companies in Italy with a presence in over 60 countries mainly around Europe. Their main focus is life insurance, however the offer coverage for material objects like car, home, accident as well as commercial and industrial risk.
- UnitedHealth Group: no matter the type of business you run, you will need health insurance for yourself, your family and your employees. UnitedHealth Group specializes in health insurance and will provide that type of company insurance for you and your company. Although, keep in mind that they are based in the United States and operate strictly amongst the states.
- State Farm: known for their history of financial stability since 1922, State Farm operates within the United States providing business interruption policies, auto insurance and many others. Alongside their unwavering financial stability, they are also known for their quality customer services. For their BOP policies, you have the option of adding insurance for utility interruption, data compromise and identity restoration and more. As for their auto insurance packages, they are special because of the numerous discounts you can get.
- Liberty Mutual: this vehicle insurance company was founded in 1912 and now offers insurance for more than 1.5 million vehicles. Specializing in auto insurance, Liberty Mutual was ranked ‘among the best’ in the Insurance Shopping Study by J.D Power in 2016. They offer quality customer and repair services in their standard coverage. Although one of the few downsides of Liberty Mutual is their relatively inexpensive policies for individuals.
- Munich Re Group: although their home market in Germany, Munich Re Group operates in 30 countries especially in Asia and Europe. Their supplementary company ERGO Insurance Group deals with most of the insurance work. The different types of insurance their offer range from life reinsurance, liability business, property-casualty business, accident insurance and fire reinsurance.
- The Hartford: specializing in company insurance, The Hartford is an insurance company based in the United States. The special thing about their insurance packages is that once you invest in a BOP, you are also paying for business interruption insurance. They also have other company insurance plans for commercial auto, commercial food, general liability and others.
- Japan Post Holding: based primarily in Japan, Japan Post Holding is divided into four main divisions one of them being Japan Post Insurance, which provides life insurance. The company operates with Japan Post Holding to provide company and life insurance for its clients.
- Allianz SE: Allianz has its headquarters in Germany and was founded in 1890. It is mainly a financial services company which offers various types of insurance. Their clients range from corporations to individuals as they offer all kinds of insurance from property damage insurance to health and life insurance.
- Nationwide: as mentioned earlier for their BOP policies, Nationwide also has a comprehensive line of insurance products from business interruption to property damage insurance. Their business interruptions insurance pays for business continuation and relocation expenses, to ensure that your business is not severely interrupted or effected.
Now let’s turn back to you, take a look at your business and think about the type of insurance you have, and the type of insurance you need. This article may have opened your eyes to some aspects that you’ve never considered before.
To make sure that you’ve pick the right company insurance, look at your business operations and picture the worst possible scenario and go from there. Examine that damages that could be done to any aspect of your business and look at what you can do to stop that from happening. Whether you’re a running a small shop, a large corporation or a humble firm, company insurance will be needed for you the long term success of your business.