Is your business underinsured?

Small businesses face a variety of risks in today’s world. Unfortunately, many companies aren’t effectively managing those risks. Of the nearly 32 million small businesses nationwide, for example, it’s estimated that 75% of them have either not enough commercial insurance or no coverage at all.

The official definition of a small business is a company that employs fewer than 500 people. Research shows that the smaller the company, the less likely they are to have adequate insurance coverage.

The top claims made by small businesses include burglary/theft and damage to property caused by perils such as water, wind, hail, fire and freezing temperatures. Another top source of claims: Legal claims made by customers, including those injured at the company’s place of business. A BOP, short for Business Owners Policy, combines vital business property and liability coverage into one convenient and affordable policy and can be an ideal solution for home-based businesses and other small firms. As a business grows, however, its insurance needs change. Many growing companies don’t keep up in the area of insurance and risk management.

Business continuity is yet another area in which small businesses fall short. Nearly three-quarters of new businesses survive the two-year mark and half survive the five-year mark. But only one-third of all companies remain in business after 10 years. One of the biggest sources of business failures is a lack of planning for the unexpected. Businesses that have a plan for unexpected events have a much higher survival rate than those that don’t.

According to the U.S. Small Business Administration, 40 percent of businesses never reopen after a disaster. Most of those that go out of business did not have enough insurance, the right coverage or any coverage at all. It’s estimated that 75% of businesses in the United States are underinsured in some way by 40 percent or more, according to international data analytics firm Marshall & Swift.

We understand that you have your hands full running your business. As licensed insurance professionals, consider our team at Accurate Protection a part of your key advisory team. We’ll partner with you to perform a thorough analysis of your company and its unique risks and find the best solutions for managing those risks. With Accurate Protection, you’ll get an insurance program specifically tailored to your needs, with the right amount and type of coverage, at an extremely competitive rate.

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Strategies for reducing your E&O risk

Facing an E&O claim is a lot like an IRS audit. It’s time-consuming, stressful and something you really want to avoid. In today’s litigious business environment, it’s important to review some of the most effective ways to reduce your E&O risk as well as provide a strong defense in the event a claim is made against you:

Obtain E&O insurance coverage. For many types of business professionals, having errors and omissions (also called professional liability) insurance is critical. In today’s world, you can be the subject of a financially devastating legal claim at any time.

Keep information about each client in a separate file. Include and summarize all interactions with each client via phone, e-mail, text and in person.

Summarize every client conversation and meeting, including phone calls. Include the day and time of the interaction, the name of the client and what was discussed. Don’t skip logging a call because you think it is trivial. Every interaction could be important in the event of an E&O claim or in court proceedings.

Make sure you’re documenting the advice you provide. When a client asks you for advice, include information in their file about what they asked you, what guidance you provided them and what action was taken as a result. If a client elected to not take the advice that you recommended to them, make sure that’s documented as well. Many E&O claims stem from instances in which a client doesn’t take a recommended course of action or says they were given incorrect information.

Keep up with your record keeping. Contemporaneously prepared documentation is best. Documentation should be as thorough as possible given time and resource constraints. Notes are considered especially credible evidence of conversations in the event of a legal claim. You can put information together months or years later, but it won’t be as accurate or credible.

Use your words carefully. Respond to your client as if your conversation is being recorded. Be precise and thorough in every text, e-mail, letter, in-person visit or phone call. Think twice about calling yourself an ‘expert’.

Use follow up letters/e-mails. If the conversation is an extremely important one, you may want to provide a summary of what was discussed in a follow-up letter or e-mail to your client. Documentation, when consistently created, will not guarantee that a claim will be settled in your favor. It will, however, give you the best defense possible.

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