Choosing the Right Coverage

The first step in choosing coverage is understanding what risks your business faces.

Risk assessment questions:
- What could go wrong in your daily operations?
- What's the worst-case scenario for each risk?
- How likely is each type of loss?
- What assets do you need to protect?
- Who could potentially sue you?

Common risk categories:
- Property risks - Fire, theft, natural disasters, equipment breakdown
- Liability risks - Customer injuries, professional mistakes, product defects
- Personnel risks - Employee injuries, key person loss
- Business interruption - Events that stop you from operating
- Cyber risks - Data breaches, ransomware, system failures

Create a risk inventory listing potential losses, their likelihood, and potential severity.

Once you know your risks, match them to appropriate coverage types.

Risk → Coverage mapping:

Bundling options:
- Business Owner's Policy (BOP) - Combines GL + Property + Business Interruption at a discount
- Commercial Package Policy (CPP) - Customizable bundle of multiple coverages

Don't forget: Some coverages are legally required (workers' comp, commercial auto liability).

Your contracts often dictate minimum insurance requirements.

Common contract requirements:
- Minimum liability limits ($1M/$2M is common, some require more)
- Additional insured status for the other party
- Waiver of subrogation clauses
- Certificate of insurance before work begins
- Specific coverage types based on the work

Reading contract insurance requirements:
- Look for the "Insurance" or "Indemnification" section
- Note specific limits required
- Check for additional insured requirements
- Identify any special endorsements needed
- Verify your policy meets requirements BEFORE signing

Certificates of Insurance (COI)
A COI is proof of coverage. Clients often request these before hiring you. Your agent can issue them quickly.

A coverage gap is a risk you face that isn't covered by your current insurance.

How gaps occur:
- Exclusions in your policies
- Limits that are too low
- Coverage types you don't have
- New risks from business growth or changes

Common gaps to watch for:
- Cyber liability (often not included in standard policies)
- Employment practices (hiring, firing, harassment claims)
- Professional services exclusion in GL (need separate E&O)
- Flood and earthquake (usually excluded from property)
- Hired/non-owned auto (employee vehicles used for business)

Annual review: Review your coverage annually and whenever your business changes significantly (new services, more employees, new location).

Ask your agent: "What's NOT covered that I should know about?"