Every business has insurance, and most would consider it a positive investment. In some instances insurance is required by law, but in many cases, businesses choose to purchase a plan for their own safety. Whether it be a home, car, or professional plan- insurance provides businesses protection in the event of a catastrophic or unforeseen loss. Of course, most never assume they will experience a significant loss that requires them to use their insurance. In reality, 40% of small businesses file an insurance claim of some kind and 75% of businesses are underinsured to some degree.
With so much focus on maintaining a strong insurance program, it can be helpful to actually understand which risks your business is most vulnerable to. Additionally, with the financial investment and effort put into selecting the right coverage, it’s helpful to know which types of claims your business is most likely to file. The following are the most common claims filed by businesses.
Theft
Theft and burglary make up one-fifth of all business insurance claims. These claims can include physical burglaries such as theft of equipment, files, goods, or expensive items. Damage to a property or building equipment that occurs during the act of theft can also fall under a theft claim. These kinds of theft claims tend to be external parties, such as strangers or criminals. Another type of theft claim is from internal employees. This can occur if employees steal equipment, money, checks, or assets. It can also come in the form of intellectual property, such as internal secrets, information, future plans, projections, or data.
The cost of theft claims will vary greatly depending on the type of theft, the value of the stolen goods, as well as any damages caused by the theft. It will also fall under different types of policies, depending on the details of the crime. External theft will likely be covered under a property insurance policy or business insurance policy. Employee theft would fall under an employee dishonesty policy or fidelity bond, depending on the specifics. Here it is clear that theft, something most people assume will never happen to them, is actually quite common. In addition, it can come in a variety of forms that require different types of coverage.
Property Damage
Property damage claims are filed by anywhere from 15% to 20% of businesses in the U.S. While property damage can occur as a result of an act of thievery, in most cases, it happens due to weather, wears and tear, or accidents. If you run a business out of a building that gets torn apart during a massive storm, not only are you going to have damage to the building itself, you’re going to experience a loss of income due to not being able to work.
Property damage can also be really severe and force businesses to shut down temporarily or find a new building to work from. Without proper insurance, property claims can lead to businesses shutting down for good due to financial reasons.
Insurance claims for property damage range anywhere from $6,000 to $35,000 on average. In extreme instances, they can reach upwards of $100,000. Since these are some of the more common types of claims with high risk, it's important to recognize that when developing your insurance program. While we all like to believe we will never need to file an insurance claim, property damage is one to prepare for.
Customer Injury or Damage to Customer Property
Customer injury is unfortunately a common occurrence. Accidents happen, and always have- but in today's world that injury or fall is often considered the responsibility of the business owner. There are endless potential scenarios, but some of the most common personal injury claims are:
- Slip and fall
- Vehicle Accident
- Reputation Harm
- Malpractice
- Defective Product
These types of claims can make headlines in the news for their steep financial costs and payout. The average cost for a personal injury claim settlement is $62,000. The cost to defend, and litigate, however, can reach millions depending on the size of the company and the injury presented. These kinds of cases are quite complicated and can take years to settle. Over time, they can put companies out of business if they aren’t adequately insured.
A customer injury claim could fall on a variety of different insurance policies, depending on the situation. For example, if the accident happens in a company car-it would fall under their auto insurance. If someone fell on company property, it would fall under their general liability policy. If the damage was reputational and was based on slander, it would be covered by advertising injury coverage. In the event an injury occurred due to a defective product off-site of the actual business, it may fall under a products liability policy.
These examples are only naming a few, and are meant to shed light on why having all necessary coverages are so important. For example, If a business opted to disregard a products policy, and a defective product claim was ruled irrelevant to a property policy, there would be no coverage available to help mitigate the claim. Consulting all possible risks and insuring them is the best way to avoid a situation like this.
Cyber Claim
This one is no surprise, as cyber threats have been on the top of everyone's minds over the past few years. A cyber claim will almost always fall under a cyber policy, but most don’t realize the vast amount of coverage options that can be included in your cyber program. A comprehensive cyber program will include first and third-party coverage, social engineering, loss of income due to network access outages, hacking, and retroactive coverage.
The most common cyber claim is a data breach claim, with phishing schemes and social attacks being the most prominent cause. We have also witnessed an increase in identity theft, ransomware, and malware. Each policy will have different endorsements and exclusions, and understanding your business vulnerabilities can help you secure the best cyber coverage options for these common claims.
Secure Coverage for Your Business with ECBM
While these are the most common claims businesses experience, there are lots of other risks that need to be taken into consideration when building an insurance program. ECBM has experts across different industries to help you understand your business's risk and secure coverage that meets your unique needs. Whether you need a full consultation on your current program or are just looking into business insurance, we’re here to help. Contact us today for more information!
