Let’s start by talking a little about what business insurance is, and why it is so important.
A business insurance is a policy that protects companies or businesses against eventual risks that may occur and generate damages to the firm.
In other words, a business insurance policy is one that a company takes out to cover itself against events that may cause losses.
There are different types of business insurance, the cost of which depends on the characteristics of each company and the risks being covered.
When companies take out business insurance, they are preventing certain risks, which would be more expensive to cover compared to taking out the policy.
Likewise, there are some cases in which the hiring of insurance is mandatory. Such as those policies that protect workers against high risk activities. These policies are required in areas or sectors such as mining or construction, for example.
Another point to take into account is that the cost of the insurance will be lower if the company has implemented risk prevention systems.
In this sense, a good example could be the installation of fire alarms, which allow to reduce possible damages or losses in case an accident occurs.
Types of Business Insurance
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The main types of business insurance are:
Property: These cover the insured’s assets for physical damages or losses that they may suffer. Among the losses covered are earthquakes and fires.
Liability: These cover damages that the company may cause to third parties.
Disability, disability or death: These cover employees (and their families) exposed to suffering an accident at work.
Vehicle: Companies can take out a policy to protect their fleet of vehicles.
Surety: This is an insurance policy that covers breaches of obligations (the policyholder is the one who has the obligations and the beneficiary is the creditor of such obligations). It may be mandatory in certain cases, for example, when it is contracted with the State.
Risk of Business Fraud
Business insurance can also include protection against the loss of cash and/or objects due to acts of dishonesty committed by an employee. This is known as dishonesty coverage.
Internal fraud in companies is a dangerous phenomenon much more frequent than we think. It is a risk to be taken into account.
It consists of the misappropriation of goods or resources by means of deceit, false management or malicious misappropriation.
It is usually a crime carried out by employees of the organization, who take advantage of their job position to manipulate data or systems for their benefit.
It is therefore essential for risk management professionals to be aware of the types of internal fraud that exist and the techniques to prevent them.
Entrepreneurs and investors should find it interesting to learn more about fidelity bonds.
A fidelity bond protects a company’s assets from any attempted theft, fraud or breach of trust by an employee in relation to the company’s tangible assets.
If you want your company to be protected against any eventuality, fidelity bonds in a company are a good option.
Types of Internal Corporate Fraud
We can find different types of internal fraud in companies. Among them, the following stand out:
Documentary fraud. This fraud occurs when the employee presents an invoice or a ticket that does not meet the conditions to be considered valid.
Chronological fraud. This is a type of internal fraud in which the expenses submitted by the employee through a payment note do not comply with the limits set by the company’s travel policies. In other words, they exceed the maximum authorized amount.
Purchase of “non-compliant” items. In these cases the infraction is committed when the employee acquires a product without authorization from the company.
Submission of the expense after the deadline. This is a fraud because the employee submits his or her expense notes or invoices after the deadline established by the company.
Manipulation of capital stock and equity. It is generally carried out by resource managers and with abuse of positions of trust.
Intentional leakage of information. This leakage can be about the technology used by the company, about its transactions, services and products, etc.
Illicit appropriation. It can be about money, goods, securities, etc.
Corporate Liability Risk
In the business world, everyday activities can become a real risk and cause significant damage to the responsible company and to administrators and managers, persons directly or indirectly related to it.
The costs of claims can be very high, not to mention the personal injuries and damages caused to all those involved.
Liability insurance for companies is a form of protection for the self-employed and entrepreneurs. Their purpose is to cover personal and material damages to third parties.
The suitability of business liability insurance is unquestionable. With this type of policy, businessmen and self-employed persons are exempted from the economic burdens of any involuntary damage committed in the work environment against third parties.
Employer’s liability: this covers claims for personal injury to employees following an accident at work, provided that the company is insured and civilly liable.
Operating civil liability: this insurance covers personal or material damages when it causes damages to third parties during the exercise of the business activity itself (distribution of products, offering of services, etc.).
Premises liability: it covers mishaps committed in the premises where the business is carried out.
Product or post work liability: covers claims for damages caused to a third party by the product manufactured and/or supplied by the insured once the product has been finished and delivered.
Professional liability is the liability derived from errors, omissions or negligence in the execution of the professional activity that generates economic, personal or material damage to a third party. A professional liability insurance is very important in many cases.
The Civil Liability insurances in the business world have been created to save the backs of self-employed and owners, although the insurers will not pay for absolutely all the mistakes they make.
Before taking out any liability insurance for your business, read the general terms and conditions carefully and check all the clauses of the agreement (including the small print).
How much Does Liability Insurance Cost?
The price of liability insurance depends very much on the scope of the legal coverage.
If you are thinking of taking out liability insurance, you are probably worried about your budget. Apart from comparing prices, it is important to take into account what and how much each type of insurance covers since, in the end, what counts is to have a good insurance that protects you against any type of claim or damage.
Directors’ Liability Insurance
A mistake in a strategic decision, not taking into account certain legislation, an unfair internal employment policy, the simple approval of annual budgets… These are all situations that can pose a risk for the administrator, manager or executive.
Corporate work requires important decisions to be taken within a company and this entails a great deal of responsibility.
Claims against administrators, directors, managers and even companies are a real risk and to be protected it is best to take out insurance to cover possible errors in the management of the company.
Having a specific insurance for directors (D&O Insurance) is the most reliable tool to prevent this type of mishaps. It does not matter whether it is a small or medium-sized company: risks exist for everyone.
Executives may find themselves in the position of having to face lawsuits against them that jeopardize their personal assets or even the viability of the company they manage. It is therefore important to choose the most appropriate type of insurance.
Directors and Officers insurance covers managers, officers, directors and the entity itself or its legal representative.