White Papers

Understanding Business Insurance - Part 5

Part 1 | Part 2 | Part 3 | Part 4 | Part 5

Professional Liability/Errors & Omissions (E&O) is a form of insurance that protects the insured from any loss sustained because of an error or oversight on his part. Professional Liability/E&O policies are important to people making representations (think of real estate agents and insurance agents) or working in a professional capacity such as lawyers or accountants. For instance, an insurance agency purchases this type of coverage to protect itself against losses from such things as failing to properly issue a policy.

Directors & Officers (D&O) insurance protects directors and officers of a company from liability claims arising out of alleged errors in judgment, breaches of duty, and wrongful acts related to their organizational activities.

Fiduciary insurance is another “add-on” policy that provides coverage in the event of a claim by an employee that the employer did not provide information regarding benefit eligibility or mismanaged the benefit plan (such as 401(k) investment options). It is important to note that the personal assets of the benefit plan fiduciary are at risk, not just the assets owned by the business. Benefits lawsuits are on the rise and obtaining this policy will ensure that personal assets are protected.

Business Interruption insurance is protection for a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. The insurance provides reimbursement for lost net profits and necessary continuing expenses. This insurance could provide income in the case of a fire. Property insurance would cover the damage from the actual fire but a Business Interruption policy would compensate the owner for profits lost during the repair downtime.

Hopefully this series has provided business owners with a basic understanding of business insurance coverage, benefits, and maybe even created some discussion items for your next insurance meeting. Insurance is one of the few things in life where it is always better to have it and not need it since spending a few extra dollars or having an extra meeting may very well save your life’s achievements.