Insurance is often thought of as a single product that’s sold to consumers or businesses, yet the reality is quite different. The insurer must necessarily understand the complete risk level that they’re being asked to underwrite. Given that the insurer is taking out the policy, they need clarity around the negative outcomes that could potentially happen and the likelihood that they will. Otherwise, the insurer risks underpricing for the risk and losing money on the policy. Also, most insurers get cover for underwritten policies via larger re-insurers, so they have a responsibility to know what they’re covering in case the reinsurer has additional questions.
Here are six reasons why you should consider sector-specific business insurance.
- The Claim Won’t Potentially Be Automatically Denied
In certain situations, a general business insurance policy won’t cover certain risks when they weren’t made clear from the outset. While the general business cover is beneficial, certain sectors include additional risks that fall outside of what can reasonably be included. In such situations, these may cause an insurance claim to be denied because these additional risks weren’t disclosed or properly understood when the policy was taken out.
It’s far better to have sector-specific insurance cover. The insurer then knows what they’re offering and with premiums that reflect that. As a result, there are fewer surprises on both sides. And this naturally leads to fewer claims being automatically denied.
- Special Benefits for Specific Insurance Types
The insurance for business sectors is often differentiated, depending on the insurer. Therefore, insurance for general contractor workers might include additional cover for their tools and equipment. This might be separate and at a higher value than included in a general business policy.
For contractors that travel with their tools, this poses a higher risk factor. Given that their tools of the trade are necessary to perform their work, the additional and specific cover is very welcome.
- Sector-Specific Inclusions or Exclusions
Sectors can have certain inclusions or exclusions that relate only to their coverage. Not only do these materially alter what is insured against, but they can also make policies more affordable when certain exclusions are applied. Having the option to have some either included or excluded allows business policyholders greater flexibility to tailor their policies to their company’s requirements.
For instance, a landlord may secure insurance that covers certain types of building damage while excluding others. Effectively, they may choose to ‘self-insure’ for some of the risks they perceive to be negligible to reduce their premiums.
- Insurance Rates Applicable to the Sector
The risks across different business sectors are not all the same. When taking out a general business insurance policy, it fails to take that into account. If you’re operating in a lower-risk sector, you could be overpaying for coverage. Being covered appropriately for applicable sector risk ensures nothing gets overlooked. Also, for some companies, it could lead to significant cost savings.
- Differentiated Cover for Legal Fees and Potential Judgements
Along with the general differences between sectors relating to the likelihood of making a claim, the term of the policy, legal fees, and potential judgments could be different too. In some sectors, the risk of being sued is far less than in others. Similarly, the cost of defending or settling a lawsuit is far greater (or lower) than it is in other sectors. For instance, a nail beauty salon is far less likely to receive a $10m lawsuit compared to a commercial building owner that later suffers from a partially collapsed building. As a result, the cover for legal fees and judgments varies between sector-specific policies to reflect the relative legal risks. Policyholders need to have the right type of insurance, so a potential lawsuit won’t exceed the legal coverage level and wipe them out.
- Flexible Deductibles
The deductibles on an insurance claim may be materially different on a per sector basis. Why is this? Claims may be more frequent in one sector and infrequently submitted in another. With lower deductibles, usually, the insurance premiums are reduced too.
While companies won’t immediately look for a sector-specific business insurance policy, they really should. It can sometimes reduce the premiums, and you can adjust the coverage to an appropriate level. It may also include relevant extras not included in a broader business policy.
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Last modified: June 23, 2021