INSURANCE: Making Sure Your Insurance Fits

When you get married, have a child or buy a home, you usually re-evaluate your insurance. However, in business, events like winning a bid, hiring new employees, or signing a contract can trigger an insurance review.

When a company grows, it changes, and it's a challenge to ensure that an insurance program changes with it. Few businesses need or have the money to buy insurance for everything. Nevertheless, a few situations may warrant a re-evaluation:

* Hiring extra help. A business can be held liable for outside contractors. When you need to hire extra help, even temporarily, it's important to investigate how hired hands and their actions will be covered by your insurance.

Adding specialized endorsements to an existing insurance program can fill in coverage gaps. For example, a contingent transportation liability endorsement would provide a waste firm protection if they hired transporters.

* Increase your staff. If you increase staff, undoubtedly the potential for employee-related problems will increase. Certainly check of your workers' compensation insurance, but another area - employment practices liability (EPL) - is receiving increased attention. Today, discrimination issues, wrongful termination, sexual or racial harassment, and violations of the Family and Medical Leave Act or the Americans with Disabilities Act all can lead to costly lawsuits. Specific insurance coverage is available in separate EPL policies, which vary greatly in scope, terms and deductibles.

* Expansion. To cover increased replacement costs when a home's value grows, you increase your homeowner's insurance. The same is true for expanding companies. As your business grows, ask yourself, "does my insurance plan offer enough protection?" Larger companies are involved in larger contracts and business commitments, and they usually offer services to a broader geographic area. A business must assure that liability limits are high enough to provide sufficient financial protection to keep the business "in business," should a claim, accident or lawsuit occur.

For many businesses, growth opportunities are global. As businesses expand overseas, it's essential to determine if the company's insurance program will extend abroad. Global expansion creates new challenges, such as managing expensive and difficult claims brought against U.S. companies. For instance, contractual language such as "Standard of Care" or providing services at a specific skill level may be defined differently.

For example, in some countries you may be liable once an error is identified instead of when economic damages are incurred by a third party. Then, Statutes of Limitation - the time in which a third party can bring a lawsuit or be barred from doing so - vary from a few months to several decades, depending on the country. In addition, foreign countries may require special general liability and workers' compensation protection for employees.

* Property sale or purchase. In insurance, commercial real estate can be an asset or liability. Some companies are using insurance in marketing, purchasing coverage to assuage potential buyers' fears about environmental liability. So, it may be wise to adjust insurance coverage by re-investing property premiums into another line of insurance.

If selling a property provides revenue, making the initial investment in premium costs may be worthwhile. When purchasing property, assuring adequate limits to cover the property is of prime importance. Other insurance coverage that protects a business' property investment include residual value loss, fire and flood.

Assuring proper insurance coverage can be tricky. However, keep in mind how much your company is worth, and to what extent the company needs to be protected while continuing to grow. Too many businesses don't realize the coverage gaps in their insurance policies as operations change. But these gaps can cost significant time and money when fighting about the lacking coverage in court.