Business owners know that their business insurance coverage has their back when property damage, bodily injury and liability are concerned. But their coverage might be limited when it comes to certain rare, but still costly, scenarios.
For instance, if a business property is so badly damaged that the owner must close its doors while it's being repaired, business interruption coverage would cover costs of operating in a temporary location. But if business is interrupted because of a product recall, that business owner would need additional coverage.
Some specialty business insurance companies offer coverage for non-traditional risks, from recalls to terrorist attacks to intellectual property risks.
Insuring the gray areas
Lockton, an international insurance broker based in London, develops insurance plans for businesses in need of specialized risk protection. These plans, called Enterprise Disruption Contingency Insurance policies, concentrate on non-physical perils that can shut down businesses.
Lockton's specialized coverage is an umbrella policy that covers a variety of risks. It kicks in when business owners experience losses that affect their supply chains or infrastructure, or that hinder their ability to sell business products or services. For instance, if a company's product is forced to be withdrawn because it failed to meet required specifications, a business owner's Enterprise Disruption Contingency Insurance would cover the loss.
The policy would also cover:
- Political instability (or terrorist attacks).
- Marine risks (for business that ship cargo).
- IT network disruption.
- Regulatory risks (if, for example, a supplier can't get you a component in time because of licensing issues).
- Inability to manufacture or distribute (including contamination or a product recall).
- Loss of intellectual property rights.
- Loss of reputation (and crisis management costs).
- Damage of goods in transit.
Product recall coverage
Sadler and Co., which specializes in insuring manufacturers, distributors and contractors, can provide business owners with product recall protection. This type of insurance would cover a policyholder's direct expenses associated with a supplier's product recall:
- Cost associated with notifying customers.
- Shipping costs.
- Extra warehouse and storage expense.
- Disposal of the recalled products.
- Extra personnel required to conduct the recall.
In addition, product recall insurance covers the expenses your clients incur when it's your product that gets recalled:
- Expenses to repair or replace the recalled product for a third party.
- Business interruption caused by the recall.
- The cost to repair brand reputation.
- The cost of buying substitute goods to replace the recalled product.
Many traditional business insurance policies do not provide sufficient insurance coverage for cyber attacks that could shut down a network, destroy data or steal customers' private information, according to the Insurance Information Institute.
Cyber insurance policies protect business owners after they experience a security breach. For instance, if someone hacks a company's server and releases sensitive information, cyber insurance pays to help fix the crisis.
ACE USA, for example, offers a digital risk insurance program called ACE DigiTech to address the need for cyber protection. ACE DigiTech offers coverage for:
Electronic media activities liability
- Network operations security liability, which includes coverage for viruses, worms and hacker attacks.
- Privacy liability, which covers costs that arise from the company's failure to properly secure computers, the loss of laptops or administrative errors.
- Identity theft, which covers legal expenses, public relations expenses and the costs of providing credit monitoring services to those affected.
, which protects your company if it's accused of libel, slander, invasion of privacy, or copyright and trademark infringement.
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