In today’s economy, it is not uncommon for companies to experience financial difficulties, and some may even have to file bankruptcy or close temporarily. The lucky ones are able to reorganize. Just because a company declares bankruptcy, it is not absolved of all insurance requirements. Here are a few important facts company owners should know concerning insurance, bankruptcy and company reorganization.

Any insurance that is compulsory for companies must be continued even if a company is filing for Chapter 11 (reorganization) or Chapter 7 (liquidation). State and federal financial responsibility requirements must be maintained.

Any contracts requiring insurance coverage will still need to be upheld, meaning if a contractual relationship requires liability or another type of insurance, the insurance requirements still apply for as long as the contractual relationship exists.

Basically, companies experiencing financial difficulties including bankruptcy and reorganization should maintain insurance coverage. Some insurance companies may issue a cancellation of coverage once they learn of an impending bankruptcy or a renewal policy may not be offered. This will vary based on the insurer and on state insurance laws.

Claims against a company’s in-force insurance policies at the time of bankruptcy may be paid through a dedicated trust fund set up as a source of recovery for claimants. A bankruptcy court approves provisions made to satisfy insurance claims. Bankruptcy laws concerning insurance during bankruptcy or reorganization may vary by state so it is best to seek legal advice from a qualified bankruptcy attorney in your area.

All companies sometimes experience financial hardships, but it doesn’t have to mean the end of the road for your business. Consider a qualified financial counselor to help your business work through difficult times. If you do file bankruptcy, consult with a business insurance professional to make sure you maintain any federal- or state-mandated insurance requirements.

Running a business is a rewarding journey. But even the best business owners can’t plan for every liability. Every year, businesses everywhere experience some form of financial or property risk. Here are the top insurance claims businesses make.

1. Theft: The most common insurance claim is to cover instances of theft. This can come from internal loss, such as employee fraud or customer theft.
2. Property damage: A large percentage of business claims are to repair the damage done from weather. That can include serious structural damage, including a roof or pipes damaged from cold weather, as well as wind and hail damage.
3. Fire damage: Fire can destroy property quickly, unfortunately. This is a serious claim that businesses owners would rather not find themselves having to make.
4. Customer injury: Businesses that host in-store customers are vulnerable to customer injuries. Customers can slip and fall in cold or wet weather, if the floor is being cleaned, trip over inventory, or even have stock fall on them. And if the public is regularly in your location, this can be an even more serious hazard.
5. Product liability: Companies that manufacture products that customers buy – cars, toys, appliances, etc. – occasionally end up taking out claims because their product was faulty. Claims because of product failure are usually for the costs associated with recalls or customer injury.
6. Vehicle accidents: Claims from vehicle-related accidents are becoming more common. Businesses who use fleet education and accident prevention can reduce those claim numbers even further.

Make sure you avoid a costly lawsuit or other business-damaging claims. Protect your assets with an insurance plan that takes the time to understand your business and create a risk management plan that works for you.