Navigating Business Growth: Essential Insurance Coverages for Scaling Companies
Mountain biking is not for beginners. When I was younger, I went mountain biking in Colorado. I thought I was skilled but quickly realized I was out of my element on the unfamiliar steep climbs and sharp drops. My naivete showed when I didn’t even know bikes could have suspension or handlebar extensions. Having friends around and safety gear on buoyed my confidence, though halfway through I regretted declining the shin pads.
Similarly, businesses reach a point where they move from comfortable operations into more challenging terrain with higher highs, steep cliffs, and imposing obstacles. Faster growth leads to bigger risks, making it crucial to upgrade your protection. Insurance is one of the primary tools for safeguarding your business, and there may be products you need now that weren't necessary when your risks were smaller.
Beyond the insurance you should already be familiar with, here are some new protective coverages that could make a significant difference:
Employment Practices Liability
This coverage protects against alleged harm caused by hiring or firing practices. It includes breach of employment contract, discrimination, harassment, retaliation, wrongful termination, or payment disputes. The cost to defend and settle these claims can be as high as the claim itself, making this coverage invaluable.
Crime Insurance
Designed to cover fraudulent acts committed by staff, this insurance includes protection against damage to outside parties and internal harm like embezzlement. Coverage extends to employee theft, forgery or alteration, physical theft, computer fraud, disappearance, and more. Unfortunately, fraud can happen in companies of any size and often involves seemingly trustworthy individuals.
Cyber Liability
The cost for this coverage has increased due to the rising number of claims, indicating more cyber-attacks and higher remediation costs. Coverage includes business interruption, ransomware events, hotline help, hardware restoration, identity monitoring, telecommunications hack, social engineering attacks, data restoration, extortion costs, defense expenses, forensics, incident response, income loss, media incidents, negative publicity, fund transfer, and cybercrime. It's an underutilized coverage that many businesses could benefit from.
Business Interruption Insurance
This coverage is used when a company’s physical location is unusable due to insured damage. It covers fixed expenses during operational disruptions. While not all circumstances trigger this coverage (e.g., government-mandated COVID lockdowns), it’s typically used alongside property coverage.
Tools and Equipment Insurance
Considering the investment businesses make in assets, it’s vital to properly insure them. Coverage can vary based on whether the equipment remains at a listed location or is mobile. Categories include:
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Permanently Attached Equipment: Immobile equipment like CNC machines, paint booths, industrial washers, etc.
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Mobile Equipment: Items with wheels or tracks not used on the road, like forklifts, bobcats, and lawnmowers.
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Business Personal Property: Computers, furniture, inventory, and other loose items.
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Miscellaneous Tools and Equipment: Smaller, lower-value items used on and off premises, often covered by a “floater” policy.
Pollution Insurance
If your business handles contaminants, cleaning up spills can be costly. This coverage is crucial for transportation and trucking businesses, where even non-toxic items like milk can be considered pollution hazards.
Cargo Insurance
For businesses transporting other people’s goods, this coverage is essential. Ensure your policy limits match the value of the cargo you carry and clearly define responsibility.
Directors & Officers (D&O) Insurance
This covers management decisions affecting stakeholders, including wrongful acts, antitrust actions, regulatory violations, HIPAA breaches, management control issues, and fiduciary responsibilities.
Abuse or Molestation Insurance
Commonly seen in religious organizations, special events, youth programs, or counseling services, this coverage protects against allegations of abuse or molestation. It’s often packaged with General Liability.
Bonding
There are three main types of bonds, and savvy businesses often advertise being “bonded and insured.” The required bond depends on the business type and third-party requirements. Bonds can benefit employers, associations, and individuals.
Conclusion
These policies don’t cover everything, especially given the creative exclusions insurance companies may implement. Your advisors can help you find a balance between protection and practicality. While you could cover your body in bubble wrap before mountain biking, there’s a middle ground between fun and safety. Stay open to your risks, control what you can, and transfer significant risks to insurance companies to keep your business on track and moving forward confidently.