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Business Insurance Policies: Protecting Your Business and Your Future


May 23, 2023

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Business insurance policies are crucial components of any successful enterprise. They provide protection against unforeseen events, liabilities, and financial losses that can jeopardize the stability and growth of your business. 

We will explore the importance, the various types of business insurance policies available and how long a business should keep expired insurance policies.

How are business insurance policies important?

Business insurance policies are essential for any company that wants to protect itself from unforeseen risks and liabilities. 

Business insurance policies can cover various aspects of a business, such as property, equipment, inventory, employees, customers, and legal issues. Basically, business insurance policies can help a business to:

  • Recover from losses due to natural disasters, theft, vandalism, fire, or other causes.
  • Compensate employees for injuries or illnesses that occur on the job or as a result of their work.
  • Defend against lawsuits or claims from customers, suppliers, competitors, or other parties.
  • Maintain a positive reputation and trust among stakeholders and the public.
  • Comply with legal and regulatory requirements and avoid penalties or fines.

Business insurance policies can vary in terms of coverage, cost, and benefits depending on the type and size of the business, the industry it operates in, and the specific risks it faces. 

How many kinds of business insurance policies?

If you are a business owner, you may be wondering how many kinds of business insurance policies are available and which ones you need to protect your assets and liabilities. 

General Liability Insurance

General liability insurance is one of the most basic and essential types of business insurance. It covers your legal responsibility for bodily injury or property damage caused by your business activities to third parties, such as customers, suppliers, or visitors. 

For example, if someone slips and falls on your premises and sues you for medical expenses and lost wages, general liability insurance can help cover the legal fees and settlement costs. General liability insurance can also cover claims of personal injury, such as libel, slander, or false advertising.

Property Insurance

Property insurance protects your physical assets, such as buildings, equipment, inventory, furniture, and fixtures, from losses due to fire, theft, vandalism, or natural disasters. 

Property insurance can help you repair or replace your damaged or stolen property and resume your business operations as soon as possible. Property insurance can also cover the loss of income or extra expenses incurred due to the interruption of your business caused by a covered peril.

Professional Liability Insurance

Professional liability insurance, also known as errors and omissions (E&O) insurance, covers your legal liability for negligence or mistakes in the delivery of your professional services. 

For example, if you are an accountant and you make an error in preparing a client’s tax return that results in a penalty or audit, professional liability insurance can help cover the legal fees and damages. Professional liability insurance is especially important for businesses that provide advice, consultation, design, or other specialized services to their clients.

Workers’ Compensation Insurance

Workers’ compensation insurance covers the medical expenses and lost wages of your employees who are injured or become ill due to their work-related activities. Workers’ compensation insurance also provides death benefits to the survivors of employees who die from work-related causes. 

Workers’ compensation insurance is required by law in most states and protects both employers and employees from the financial consequences of workplace accidents.

Cyber Liability Insurance

Cyber liability insurance covers your liability for data breaches or cyberattacks that compromise the security or privacy of your customers’ or employees’ personal or financial information. Cyber liability insurance can help cover the costs of notifying affected parties, providing credit monitoring services, restoring lost data, repairing damaged systems, and defending against lawsuits or regulatory fines. 

Cyber liability insurance is increasingly important for businesses that store or transmit sensitive data online or use cloud-based services.

Depending on the nature and size of your business, you may need other types of business insurance policies as well, such as commercial auto insurance, product liability insurance, business interruption insurance, or umbrella liability insurance. 

Business Insurance Policies: Protecting Your Business and Your Future

Business Insurance Policies: Protecting Your Business and Your Future

How long should a business keep expired insurance policies?

If you run a business, you may wonder how long you should keep your expired insurance policies. After all, you don’t want to clutter your office with unnecessary paperwork, but you also don’t want to risk losing important information that may be needed in the future. 

  • For occurrence-based liability policies, such as general liability or professional liability, you should keep them forever. These policies cover claims that arise from incidents that occurred during the policy period, regardless of when the claim is filed.

For example, if a customer slips and falls on your premises in 2020 and sues you in 2023, your 2020 policy will respond, even if it has expired. Therefore, you should retain these policies indefinitely in case you need to prove your coverage.

  • For claims-made liability policies, such as directors and officers liability or errors and omissions liability, you should keep them for at least six years after they expire. These policies cover claims that are made and reported during the policy period or within an extended reporting period (also known as a tail). 

For example, if a client accuses you of negligence in 2020 and you report it to your insurer in 2021, your 2020 policy will respond, as long as it has not expired or you have purchased a tail. However, if you report it in 2022 and your policy has expired without a tail, you will not have coverage. 

Therefore, you should keep these policies for a reasonable amount of time after they expire or after the tail ends, in case you need to verify your coverage or file a late claim.

  • For property policies, such as commercial property or business interruption, you should keep them for at least three years after they expire. 

These policies cover losses that occur during the policy period and are usually reported shortly after they happen. For example, if a fire damages your building in 2020 and you file a claim with your insurer in 2021, your 2020 policy will respond. 

However, if you file a claim in 2023 and your policy has expired, you will not have coverage. Therefore, you should keep these policies for a minimum of three years after they expire, in case you need to document your coverage or file a delayed claim.

You should also review your current policies regularly and make sure they are up-to-date and adequate for your needs. If you have any questions about your insurance coverage or need assistance with finding the best policy for your business, contact us today.

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Note: The content in this article is for general informative purposes only. You should conduct your own research or ask for specialist advice before making any financial decisions. All information in this article is current as of the date of publication, and DNBC Financial Group reserves the right to modify, add, or remove any information. We don’t provide any express or implied representations, warranties, or guarantees regarding the accuracy, completeness, or currency of the content within this publication.