General Liability Insurance and what it doesn’t cover. It DOES NOT cover your business property; tools, machinery, inventory, etc. (for this you need BPP or Inland Marine Insurance), it DOES NOT cover your medical bills (This would be Health or Workers’ Compensation Insurance), it DOES NOT cover your business vehicle (your car or truck needs to be insured with a Commercial Auto policy). Liability only covers claims against you when you are liable for something – for example, if you are a plumber and your pipe connections fail, you could be liable for damage to the home or business space from that leaking water.
Even the smallest of internet start-ups need the same types of protection as the huge ones (Facebook, Twitter, etc.). When I talk to these small business owners and they say they are not ready to purchase insurance, all I can think of is how this may end up destroying their lifelong dream of becoming the next big thing.. There are two coverages that people may often overlook; #1.) Cyber or Data Liability and #2.) D&O (Directors and Officers).
Let’s start with #2, since it’s more easily comprehended. Directors and Officers Insurance provides coverage for the Directors and Officers of any private or public company. Often a claim against a small or large firm will name the Directors and Officers of the company in the lawsuit. This puts your personal assets at risk; your home, investments, bank accounts, cash and more. Moreover, in closely-held private companies, the owner’s personal net worth may be tied to the financial health of the company making costly D&O liability claims even more devastating. (source)
Now for the more complicated #1. – Cyber or Data Liability – if this new internet start-up has any data on any of it’s users, then hackers are already thinking about how to get that information from your system, servers or database. Or what if an employee’s laptop or iPad gets lost or stolen? Anything on that device has the ability to become a million or more dollar claim. If anyone breaches your database, you are on the hook within seconds; defense costs, notification of breach to all customers, etc.
Ponemon Institute’s 2010 annual study estimates an average post-breach cost of $214 per record. Although this includes $141 in lost business cost, the remaining $73 of actual remediation cost per record can add up quickly. If you have 50,000 customers, that’s $3,650,000 REAL DOLLARS! (source: Apogee)
While hacking incidents are the most recognizable and expensive cause of data loss, they are not the most common. It’s a startling fact – simple human error accounts for three out of four incidents (source: Apogee):
- 40% of the data breach cases are from people making mistakes, such as losing laptops and flash drives.
- 36% are system glitches, such as software updates, which inadvertently expose sensitive private files.
- 24% are malicious and criminal attacks.
Now think about it… A couple thousand dollars on a policy to potentially protect millions of dollars, in turn saving your company and/or personal assets… That’s a pretty good investment – Are you ready to purchase now? If so, contact us here and we’ll walk you through it all.
Small Business Insurance is something that every entrepreneur should think about… It can protect you from employee theft or dishonesty, provide you with income should your business not be able to operate as normal, it can protect your property, defend you against advertising claims and much, much more. And while every business is unique, each one of them should have some form of insurance in place to protect their assets, their brand and their longevity.