Protecting Your Business Against the Most Common Insurance Claims

If you’re like most business owners you want to maximize your profits and minimize the risks you take. As your business grows you may implement certain processes to help you operate more efficiently, such as lean inventory principles or an agile approach to working with clients. One of the easiest things you can do to maximize your cash flow, however, is to be sure you’re carrying the right amount of commercial insurance for your business needs.

But how much is enough?

Your insurance needs will vary depending on your specific industry, operations, and speciality, but there are some common threats that every business owner should be aware of.

The Most Common Commercial Insurance Claims

Here are the most common (and costly) commercial insurance claims business owners are likely to face.

Property Loss and Damage

Burglary and theft will affect 20% of business owners, according to an analysis of The Hartford’s small business claims. That makes this the most common claim business owners are likely to face.

In fact, loss or damage to your property are the top four leading causes of commercial insurance claims:

  1. Burglary and theft - 20%
  2. Water and freezing damage - 15%
  3. Wind and hail damage - 15%
  4. Fire - 10%

Property damage and loss is a big threat, no matter what your business specializes in.

Liability Claims

Four out of 10 small businesses are likely to experience a property or general liability claim in the next 10 years. The following liability claims make up almost the entire remainder of the top 10 most common claims list:

  • Customer slip and fall - 10%
  • Customer injury and damage - less than 5%
  • Product liability - less than 5%
  • Reputational harm - less than 5%

But what other risks are business owners most likely to face?

Employee Injuries and Auto Accidents

While 8 out of 10 of the most common commercial claims involve property or general liability scenarios, there are two more common claims to consider:

  • Struck by objects - less than 5%
  • Auto accidents - less than 5%

Struck by claims are more common in some industries than other, such as the construction industry. If you’re a contractor or own a construction business, then you know that “struck by” incidents are one of the leading causes of construction-related deaths (otherwise known as the Fatal Four.)

Auto accidents can happen to anyone at anytime. If your company-owned vehicles (or your employees) are on the road for your business, there’s no predicting when an accident could strike.

The Costliest Commercial Insurance Claims

The most common commercial insurance claims aren’t necessarily the costliest. The most common claim, burglary or theft, has an average claim amount of $8,000.

So which claim tends to wrack-up the largest bill?

Reputational Harm

The average cost of a reputational harm claim is $50,000. Slander, libel, and violation of privacy situations can quickly become lawsuits with big price tags. If your company sends out a Tweet or produces an ad disparaging a competitor who feels your actions damaged their reputation or caused financial losses, you could be facing a very costly lawsuit.

Vehicle Accidents

The second most costly commercial insurance claim is vehicle accidents, which can average $45,000. This figure isn’t so surprising when you consider that a single claim could include damage to multiple vehicles as well as injuries to multiple people, such as drivers and passengers involved.

Fire

Fire claims are the fourth most common and the third most costly, with an average price tag of $35,000. According to the National Fire Protection Association, fire losses account for approximately $2.3 billion in commercial and industrial loss each year. (That number doesn’t even include business interruption losses.)

Every business is unique in its insurance needs and not every commercial insurance package is the same. You may need coverage specific to a ski and bike shop that offers lessons and skills camps, while the cafe next door may have completely different insurance needs, such as coverage in the event of a food-borne illness.

When it comes time to choose the best insurance coverage for your business, protecting yourself from the most common and costliest claims is a good starting point. That means general liability insurance, property insurance (if you have a physical business location), commercial auto (if your business owns or operates vehicles), and workers’ comp (if you have employees). Beyond that, talk to your insurance professional about the best way to protect your assets from the specific risks that your individual business type and industry face.

With the right combination of coverage, you can be sure your business is protected against the risks it’s most likely to face. And that means more cash for growth and expansion and less reserves needed for an unexpected (but common) claim.

 

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