Commercial insurance essential for business survival: businesses need to consider their 'appetite for risk'.

• Author: Barbour, Tracy
• Position: INSURANCE

Commercial insurance helps businesses transfer certain known and unknown hazards to a third party, making it an essential tool for risk management. Alaska's insurance experts say companies need to purchase the right type and level of insurance--and review their coverage regularly--to adequately protect their business.

Every business activity creates some sort of risk--even something as innocuous as sending an employee to the store for staples. Of course, not all risks--particularly acts of God--are insurable. And most businesses insure only about 20 percent of their risk, according to Christopher Pobieglo, CIC, CRIS, president of Business Insurance Associates Inc. "You're going to insure the most common risk exposures," says Pobieglo, who has been in the insurance business for more than twenty years.

Getting insurance coverage is the only risk measure that some business owners take, but that's not a substitute for managing risk, Pobieglo says. "Certainly purchasing insurance is an important piece of managing your risk, but it shouldn't be the totality of it," he says.

Types of Insurance

There is a plethora of insurance products available to help companies cover the risks they may encounter during the course of doing business. Some of the most basic types are compulsory, such as state-mandated workers' compensation for employers and commercial auto insurance. Incidentally, even businesses without a commercial fleet can benefit from hired and non-ownership auto liability insurance. Also, financial institutions commonly require borrowers to carry insurance coverage to protect financed property.

Another common contractual requirement is general liability insurance, which protects business owners against claims of liability for bodily injury, property damage, and personal and advertising injury. Another option is excess liability insurance to cover losses that surpass the general liability policy's dollar limit. Similarly, an umbrella policy can also provide liability coverage for exposures not covered under the primary general liability insurance policies.

There's also more specialized insurance to fit the unique exposures of certain businesses, professions, and situations. Key examples include medical malpractice insurance for physicians, tenant discrimination liability coverage for property owners, pollution liability coverage, builder's risk coverage, crime insurance, directors' and officers' insurance, and professional liability/errors and omissions insurance.

Professional liability/errors and omissions insurance is commonly purchased by engineers and architects. However, Pobieglo says, many consultants tend not to carry this kind of insurance--even though they have the potential to make inadvertent errors and omissions when assisting clients. But neglecting to obtain this type of coverage can be an oversight on their part. "Any time you are offering advice or consultation, there is a risk that person could act on that advice and be harmed," he explains.

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