Commonly Misunderstood Types of Commercial Insurance

agent and client discussing insurance policy

Commonly Misunderstood Types of Commercial Insurance

Explaining business insurance policies that many people misunderstand.

As a business owner, you know how important it is to have the right general liability, commercial property, workers compensation, and other basic policies in place.  However, there are several commercial policies that business owners overlook due to common misconceptions.  To ensure that you make informed coverage decisions, here are some of the most commonly misunderstood business insurance policies explained in detail.

Directors & Officers (D&O) Liability Insurance

What is it?

D&O insurance is a type of liability insurance that protects a company’s executive figures while they are serving on a board of directors and/or as officers of the company.  This insurance offers coverage in the event that executives make poor decisions that have adverse financial consequences for involved parties (employees, vendors, customers, investors, etc.).

Why is it misunderstood?

Many companies assume that their executive staff is protected by other forms of liability coverage.  However, directors and officers need to secure their own special form of coverage.  Failing to secure this coverage would leave your company’s executive staff liable for compensating affected parties and covering their own legal costs.  As the cost of these claims is typically very high, failing to secure D&O insurance can leave the personal assets of executive staff vulnerable.

Bottom line:

If your business is managed by a board of directors or a team of company officers, then securing D&O liability insurance is the only way to ensure that the cost of a claim does not leave them in a state of financial ruin.

Equipment Breakdown Insurance

What is it?

Equipment breakdown insurance provides coverage in the event that your business’s equipment breaks down due to a mechanical issue.  In addition to compensating you for broken equipment, this type of insurance will also replace the income that your business lost due to the defective machinery.

Why is it misunderstood?

Most businesses assume their company’s equipment is covered by their commercial property insurance.  Unfortunately, commercial property policies only offer coverage for equipment that is damaged by external issues such as fire, natural disaster, vandalism, and so on.  This means that equipment damages caused by internal malfunctions will not be covered under your commercial property insurance.  The only way to address these damages is with an equipment breakdown policy.

Bottom Line

If your business relies on specialty equipment, then having a key piece of machinery break down can be devastating.  The only way to secure coverage to repair or replace broken machinery is with equipment breakdown coverage.

These are some of the commonly misunderstood business insurance policies explained in more detail.  Do you have additional questions about your commercial coverage?  If so, then contact the experts at Club Agency Insurance Brokerage in Garden City, New York.  Our dedicated team is eager to assist you with all your insurance needs today.