4 types of specialized business insurance

Chris Kissell

A small business provides both joys and headaches. Specialized business insurance can help you deal with hard times and keep your business afloat.

Many types of specialized business insurance are available, so it's always a good idea to sit down with your insurance agent or broker to find out exactly what you need to protect your livelihood.

To get you started, here are four types of specialized business insurance you may want to consider for your small business.

Kidnap and ransom insurance

As bizarre as it sounds, some employees may be at especially high risk for being kidnapped.

That's especially true as companies looking for new revenue streams move into higher-risk markets in Africa or Latin America, says Gregory Bangs, Chubb Insurance's worldwide product manager for crime and kidnap and ransom insurance.

Kidnap and ransom insurance covers some the expense of dealing with the demands of a kidnapper. Covered costs typically include lost wages, ransom amounts and hostage negotiation fees.

This coverage may be included in a business insurance package policy or it may be purchased as a stand-alone policy.

The cost of coverage varies according to the level of risk. For example, a company that regularly sends employees into certain parts of Sub-Saharan Africa will pay more, Bangs says. So will domestic employers in businesses that may be targets of extremists, like tobacco companies or businesses that engage in animal testing.

Multinational companies especially need this coverage, but increasingly, smaller businesses based in the U.S. also find themselves at risk of cyber-extortion and other threats. Bangs says a small domestic business that does not engage in high-risk travel can secure about $1 million in coverage for less than $1,000 a year.

For options regarding kidnap and ransom insurance, the Insurance Information Institute suggests checking out Rough Notes Co.'s insurance marketplace.

Valuable papers insurance

If a fire or flood engulfs your business, critically important records -- contracts, invoices, lists of customers -- could disappear. Valuable papers insurance reimburses you for the cost of restoring or re-creating such documents, as well as books, deeds and other printed or written records that are lost. Cash isn't covered, though.

David McGraw, a product management specialist at American Family Insurance, says valuable papers insurance is great for those who deal with important paperwork, such as accountants and attorneys.

Valuable papers insurance is available from many insurers, typically as part of a business insurance package.

Key person insurance

Many small businesses have an owner or employee whose skills make that person difficult to replace. For instance, maybe the person has unique management skills or maintains close relationships with suppliers and valued customers.

Key person insurance compensates the business financially if the person dies if you buy key person life insurance) or is disabled if you buy key person disability income insurance), says Tara Reynolds, corporate vice president of consumer and product marketing for MassMutual Financial Group.

"The business may lose both revenues and clients while it searches for or trains a replacement," Reynolds says. "Key person life or disability income insurance can provide funds to help ease some of the financial burden during that challenging time."

Common examples of key people include the CEO, the top salesperson or the lead software programmer, Reynolds says.

"Employees with unique skill sets, important client relationships, or special knowledge from many years of service would be considered 'key,'" she says. "Business owners might refer to these individuals as priceless to the success of the business. They are often very difficult to replace."

The cost of this insurance typically depends on whether you purchase term coverage which only pays out if a covered loss occurs and expires after a set period of time) or permanent coverage which remains in force as long as the premium is paid).

Other factors that affect costs include the amount of coverage purchased, and the key person's age and health.

International operations insurance

If your business becomes so successful that you expand overseas, consider international operations insurance. This type of coverage protects you if employees travel internationally, or are temporarily or permanently stationed in another country.

Most policies include coverage for things like general liability, accidental death and dismemberment, medical expenses and auto liability.

The ACE Group sells this type of insurance. A standard package includes property and liability coverage that can be tailored to a business' needs, according to Tim Benson, senior vice president of the ACE Multinational Client Group.

"Our typical clients include U.S.-based companies, nonprofit organizations and educational institutions that have employees or volunteer workers who travel, work or sell products overseas," he says. Other clients simply have locations outside the U.S.

Benson says ACE coverage premiums begin at $2,500 annually, with a discount for packages purchased online.

See how much you could save today on your insurance. Get your free business insurance quotes today!