7 Often Overlooked Insurance Policies Every Business Needs

Business insurance is essential for financial security, yet nearly 75% of U.S. businesses are underinsured by 40%, leaving them vulnerable. While you may already carry general liability or property coverage, it’s easy to overlook specialized policies that could protect your company from catastrophic losses. In fact, 25% of businesses face significant financial strain due to inadequate coverage. Here are seven commonly overlooked insurance policies and the risks of operating without them.

You Can’t Afford to Overlook These Insurance Policies

Cyber Insurance

In today’s digital age, cyber insurance has gone from optional to an absolute necessity. Operating within a digital environment exposes your business to various cyberthreats, particularly third-party vendor breaches. A breach in your vendor’s security can jeopardize customer data, leading to potential lawsuits and financial challenges.

As AI-powered cyber attacks become more prevalent, breaches are becoming quicker, more complex and more difficult to detect. Strict regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) can impose severe penalties and further compound the problem. You’re putting your business’s future at risk without adequate cyber coverage.

Employment Practices Liability (EPL) Insurance

The increase in lawsuits from employees and regulatory bodies has made EPL insurance indispensable. Recent EEOC data shows 110 merit lawsuits were filed last year against unlawful employment practices, underscoring the surge in discrimination claims related to disabilities, age, pregnancy accommodations and LGBTQ+ protections.

Disability discrimination under the ADA remains a significant concern, and claims related to retaliation or sexual harassment, especially with younger workers, present significant risks. Businesses might also face lawsuits for noncompliance with EEO-1 reporting requirements, exposing your business to legal challenges.

Simply having an HR handbook isn’t enough. The average cost of settling employment-related lawsuits exceeds $250,000, and without EPLI, your organization risks overwhelming legal expenses, reputational damage and long-term financial harm.

Inland Marine Insurance

As business operations become increasingly mobile, inland marine insurance addresses the dangerous gaps that standard property policies often overlook. Whether you’re transporting goods or specialized equipment, inland marine insurance protects your assets during transit. Imagine moving crucial equipment that gets damaged en route; without this coverage, you could face costly delays and significant financial losses.

Inland marine insurance also applies to pop-up locations and temporary installations where traditional property policies fall short. The reality is that delays from damaged equipment can hurt your bottom line, highlighting the importance of adding inland marine insurance to your coverage portfolio.

Business Interruption Insurance

The rise in frequency and intensity of natural disasters underscores the critical importance of business interruption insurance. This coverage addresses physical damage and safeguards against financial losses from operational shutdowns caused by events like hurricanes, wildfires and floods.

Modern challenges like cloud service outages and unexpected shutdowns of key suppliers can disrupt business operations just as severely. The gap between the initial disruption and the insurance payout can stretch for months, leaving you financially vulnerable. Without business interruption insurance, you could experience significant revenue loss or even permanent closure.

Flood Insurance

Climate change has reshaped weather patterns, resulting in floods that can impact businesses unpredictably. Even if you believe you’re in a low-risk area, flash floods can still cause catastrophic damage. The average commercial flood claim is $90,000, but severe floods often result in even higher costs.

Many businesses mistakenly assume their standard property insurance covers floods, but it doesn’t. Without flood insurance, you’re responsible for all repair expenses, putting your business at serious financial risks. Given rising property values and repair costs, securing flood insurance can’t be overlooked.

Umbrella/Excess Liability Insurance

In today’s litigious environment, standard liability limits are no longer sufficient to protect your business. Umbrella and excess liability policies provide an extra layer of protection when your primary policies limits are exhausted. Consider the risk of a multiparty lawsuit that results in damages exceeding your coverage; without an umbrella policy, the additional costs come off your bottom line, potentially bankrupting the business.

The rise of social inflation has led to more substantial jury awards and settlements and made these additional coverage layers more important than ever. For a modest premium, you can avoid the catastrophic financial fallout from a major lawsuit.

Equipment Breakdown Insurance

As your business increasingly depends on technology, having equipment breakdown insurance is essential for maintaining seamless operations. A single failure (e.g., server room HVAC failure) can lead to serious disruptions. If you’re not adequately covered, expenses from downtime, repairs and replacements can quickly add up.

Breakdowns often come with hidden costs like expedited shipping for parts or temporary replacements, which can escalate quickly. The potential revenue lost during this time can far outweigh the repair costs, underscoring the need for equipment breakdown insurance for any business reliant on technology.

What to Do If Your Business Is Missing These Critical Coverages

If you’re missing any of the key coverages, it’s important to act quickly. Insurance gaps can expose your company to unnecessary risks, and waiting until a problem arises could result in significant financial, operational and reputational setbacks.

Here’s what you can do to protect your business:

• Schedule a coverage review to identify gaps. Partner with an expert insurance advisor to assess your risks, identify underinsured areas and ensure your coverage reduces exposures.
• Prioritize essential coverages. If you’re facing budget constraints, emphasize the key coverages that directly relate to your industry and operational risks. For example, if you manage sensitive customer data, consider making cyber insurance a priority. If you have mobile operations, securing inland marine insurance is essential.
• Consider bundling policies. Many insurers offer packages that provide comprehensive coverage at competitive rates. Consult your broker about package deals or multipolicy discounts to maximize your coverage while staying within budget.
• Establish an annual risk assessment. Make regular insurance reviews part of your risk management strategy to address business growth and regulatory changes that may impact your risk profile. Working with your advisor on an annual basis will ensure your insurance coverage aligns with the changing dynamics of your business
• Don’t wait for a claim to act. Businesses that postpone adjusting their coverage often end up covering expenses that could have been prevented.

We’re Here to Protect Your Business from Overlooked Risks

Securing the right insurance policies can safeguard your business from a wide range of financial risks. Failing to account for these overlooked coverages can lead to devastating financial consequences. To ensure your business is fully protected, connect with a member of our team for a complementary review of your policies and to identify any coverage gaps.