Data from the Small Business Administration (SBA) shows that there are currently more than 4 million small businesses in California. However, about 75% of these businesses are underinsured, facing the risk of closure in the event of a disaster. While most businesses don’t have enough insurance because of financial constraints, others have ignored important coverages due to the common myths surrounding commercial insurance. With that in mind, here’s a look at four popular commercial insurance myths that you must be aware of.
Commercial Liability Insurance Covers Cyberattacks
In 2020 alone, California lost more than $600 million to cybercriminals, which was more than any other state lost during that period. This shows just how rampant cyberattacks are in California, and why every business in the state should strive to become cyber resilient. While there’s a notion that the typical commercial liability insurance covers cyberattacks, the truth is that you need separate cyber liability insurance. This will make it easier for your business to bounce back in case you lose data and money through cyberattacks in the form of data breaches or malware attacks. Take note that you can add cyber liability insurance as an endorsement to your commercial liability insurance.
Commercial Insurance Is Only Mandatory for Big Companies
When natural disasters strike, they affect both small and large businesses. For instance, in 2020 alone, wildfires in California destroyed thousands of businesses, amounting to billions in insured losses. Since all businesses are at risk of perils such as fires, earthquakes, lawsuits, vandalism, and theft, purchasing the right commercial insurance is necessary regardless of the size of your business. In fact, small businesses face a higher risk of closure in case of a disaster since they don’t yet have an effective business continuity plan and enough finances to bounce back.
Commercial Liability Insurance Is Not Required for Consultancy Firms
Professional service-providing firms such as consultancy and law firms also require business insurance. While they may not face physical risks such as accidents or property damage, lawsuits are a common problem in such firms. They mainly arise due to issues such as wrong professional advice, malpractice, and negligence. Since general liability insurance may not provide coverage for such risks, you should have separate professional liability insurance, also known as errors and omissions policy. Take note that you don’t have to actually commit a crime to face a professional liability lawsuit. This is why you must have adequate coverage to protect your business from expensive claims. Additionally, the errors and omissions policy improves your business image before your clients.
Your Employees Will Most Likely Sue You If You Have Employment Practices Liability Coverage
According to the U.S. Chamber Institute for Legal Reform (ILR), COVID-19-related lawsuits are now affecting many small businesses in California. This is due to issues such as negligence, failure to observe the COVID-19 safety measures, and lack of compensation for employees that contract the virus at work. Other than an unsafe working environment, your employees can sue you for issues such as harassment, wrongful termination, and discrimination at the workplace. The employment practices liability coverage can protect your finances in case your employees sue you. However, this does not mean that having this coverage will make your employees want to sue you. That’s a myth you should ignore.
These are some of the commercial insurance myths that can make you ignore important coverage for your business. To ensure you have adequate commercial insurance, you should review your commercial insurance needs regularly. Do you have more questions about commercial insurance? Contact our experts at Modab Insurance Services, located in Thousand Oaks, CA 91362. We are ready to assist you with all your coverage needs today!