Most small business owners know how important it is to have insurance. However, many who buy a general liability policy unknowingly enter into agreements where they don’t have sufficient coverage. Below are three common scenarios to learn from in order to avoid a lawsuit with a negative outcome.
1. “Claims Made” vs. “Occurrences Policy”
Sometimes referred to as a “disappearing policy” – a contract will state it covers “claims made” before the contract expiration date. Unfortunately, if you make a claim for something that happened during the policy time period after it has already expired – you’re not covered. This type of policy only covers claims during the policy coverage period.
However, business owners should look for a policy that covers “occurrences” which will cover them for incidents that happened while under contract regardless of the claim date. These do run at a higher rate that “claims made” policies, but the protection is definitely worth it.
2. “Per Policy” vs. “Per Project”
Oftentimes, new business owners think a general liability policy with $1 million in coverage insures them for any incident that might occur up to that amount. Unfortunately, if it’s a “per policy” contract, the total coverage limit for all claims is only $1 million.
Instead, look for a policy that provides coverage “per project.” As long as you don’t go over your total dollar value of the coverage you purchased, you’re covered for multiple claims across multiple projects.
3. Policies that don’t cover “Your Work”
If a company only has general liability coverage, it actually required an endorsement that states “your work” as the business owner is covered. Without this endorsement, if the owner makes a mistake and a claim is filed – it will not be covered. When it’s all hands on deck – meaning the owner is often in the trenches with her employees – it could be very expensive to forego having this endorsement.
Read the original article here: http://www.cnbc.com/2015/07/14/3-insurance-scams-every-small-business-should-avoid.html