​One of the keys to managing risks when you first start a business is getting the right insurance to cover your operations, property and potential liabilities.
Unfortunately, many business owners fail to update their policies and just renew them year after year even if the company has grown, expanded operations and facilities, and added new equipment and property. If this is the case, the old coverage would be insufficient.

Business owners should review their policies every year to catch any omissions and make sure they are not underinsured. It is common for smaller businesses to secure a basic business owner's policy (BOP) and workers' comp when they first get started. A BOP includes:

• Property insurance for buildings and contents owned by the company.
• Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business.
• Liability protection, which covers your company's legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.

 
Outgrowing BOP coverage
As your business expands, you may outgrow the BOP and need additional coverage to manage your risks. Some examples include the following:

• Workers' comp. While you likely added a workers' comp policy when you made your first hire, you will need to update it as you add more staff. If you don't, when your insurer audits you, you may face a hefty bill for additional premium. Be diligent about your policy and inform your insurer as you grow.
• Excess umbrella or liability coverage. You should consider this insurance to cover claims that exceed your BOP's limit, providing you with an added layer of protection to protect your assets.
• Professional liability insurance. These policies provide coverage for mistakes for any professional services you provide. This used to be mainly for doctors, attorneys and accountants, but as our service sector has expanded it includes services provided by coders and software developers, appraisers, consultants, real estate brokers, graphic designers and home inspectors, among others.
• Auto, non-owned and hired coverage. This protects business owners if an employee has an accident while driving a rental or personal vehicle on the job. 
• Employment practices liability insurance. This covers human resources issues related to discrimination, harassment and termination.
• Commercial auto insurance. This coverage protects autos that are not under a personal policy.
• Directors and officers liability coverage. This protects officers and directors in the event they are sued for wrongful acts while on duty.

 
Depending on the business, some or most of these insurance options may be required for adequate protection. Annual reviews with us are ideal for discussing your options. Make sure these elements are considered:

• If computers, equipment or other types of property have been added, this would be reason to increase policy limits.
• While revenue is an important consideration, it is also important to remember that it is a potential liability. 
• A general liability or BOP may be affected if the owner has moved, added or closed locations.
• Hired and non-hired auto insurance is necessary if workers are driving frequently in rented vehicles. 
• For specific types of work and services, employers may need additional endorsements for their general liability policies.
• People who are serving new industries or clients may have problems with their professional liability coverage if they have large amounts of high-risk industries or customers.
• If you experience an increase in the number of workers you have, or there is a higher turnover rate, it is important to think about employment practices liability coverage. And as mentioned, your workers' comp policy should be updated to reflect any staffing changes and that you categorize your workers properly.

Linda is a junior partner in a law firm and drives a car that the firm owns and insures. The firm's auto insurance covers her as a partner and she doesn't own another car, so she sees no need to have her own policy.  

Most of the time, this is not a problem. However, spring break comes and she takes her kids to DisneyWorld. She rents a car at the Orlando airport and never gives a thought to whether her firm's insurance will cover her if she has an accident with the rental. In this case, a phone conversation with the firm's insurance agent would have been a great idea.

While driving to her hotel one night, Linda rear-ends a new Lexus. The damage to the other car is extensive; Linda looks to her firm's auto liability coverage for the cost of repairing it. 

The ISO Business Auto Policy covers the person or organization shown in the policy declarations (the information page at the beginning.) In this case, the name shown in the policy Declarations is the name of Linda's firm. 

The policy goes on to say that, for liability insurance, the firm is an insured and so is anyone else using, with the firm's permission, a covered auto the firm owns, hires or borrows, with some exceptions. 

Unfortunately for Linda, the firm didn't rent the car; she did … in her own name. Consequently, the firm's insurance will not cover her liability for this accident. She will be forced to pay for it out of her own funds.

However, there are a couple of policy endorsements that her firm could have purchased that would have solved Linda's problem. 
 

Drive Other Car Coverage - Broadened Coverage for Named Individuals

The insurance company will require the insured to list the names of one or more individuals on the endorsement. 

The change extends several of the policy's coverages so that they apply to the listed individuals and their resident spouses. This endorsement comes with some significant limitations:

• It extends to the listed individuals coverages that the policy already provides; it does not add coverages not provided. If the firm's policy does not provide collision coverage on its vehicles, Linda would not have collision coverage on a car she rents.
• It covers the named individual's spouse if they live together. If Linda is married to Jim, Jim automatically has coverage for a car he rents in his name. 
• The only family member it automatically covers is the resident spouse. It will not cover any other family members in the household unless the endorsement specifically lists their names.

Individual Named Insured

An alternative to this endorsement is to list individuals' names in the policy declarations along with the firm's name and attach an endorsement called Individual Named Insured. 

The endorsement covers the individual listed in the declarations and automatically covers the person's resident spouse and family members. It also covers these individuals should they injure another of the firm's employees.

These policy changes affect several coverages, including liability, uninsured motorist, medical payments, and physical damage. 
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If you are considering doing this, you should consult with us to discuss the endorsements' details and identify the one that will best insure the concerned individuals. With the right coverage in place, Linda can enjoy her vacation without having to worry about who will pay for the fender-bender.