Business risk management helps organizations better manage their risks by identifying the likelihood of potential threats. The foundation of any effective business risk management program is commercial lines insurance. Commercial lines insurance helps protect companies from losses during normal business operations.
Learn how to evaluate business risks and guard against costly lawsuits and other setbacks.
Identifying Business Risks
Risks are inevitable in business. However, businesses can minimize the impact of risks on their revenue, productivity, and customer satisfaction by staying prepared. Identifying risks is an essential component of any strategic business plan. Common risks that companies face include:
- Physical risks – e.g., fires and explosions
- Location risks – e.g., floods and storm damage
- Human risks – e.g., theft and embezzlement
- Technology risks – e.g., data breaches and power outages
Perform a Risk Assessment
Once risks have been identified, businesses should prioritize them based on their probability. For example, a risk may be “Very likely to occur,” “Have a moderate chance of occurring,” or “Have little chance of occurring.” An effective risk management strategy should create a balance between protecting the organization from possible risks without hindering its growth.
Insure Against Potential Risks
Commercial lines insurance is a broad type of insurance that provides organizations with liability insurance to protect against general business risks. These policies cover common customer, employee, and company property risks across many sectors, from finance and healthcare to manufacturing and construction.
Most businesses can benefit from carrying the following types of commercial lines insurance:
1. Professional Liability Insurance
Professional liability insurance (PLI) protects organizations when employees make mistakes when providing professional services to clients or customers. Also known as errors and omissions (E&O) insurance, this policy safeguards against claims of negligence, inaccurate advice, misrepresentation, copyright infringement, and libel or slander.
2. Workers’ Compensation Insurance
Workers’ compensation provides employees who become ill or injured on the job with lost wages, medical expenses, or rehabilitation costs. Each state mandates coverage and relies on a social contract between management and labor.
Business owners who purchase workers’ compensation insurance are protected from civil suits from employees who become ill or injured at work.
3. Commercial Property Insurance
Commercial property insurance protects an organization’s physical assets from covered perils such as fire, burst pipes, explosions, vandalism, and theft. Some types of incidents, such as floods and earthquakes, are not generally covered by commercial property insurance but can be added to a policy.
Commercial property insurance covers the building and everything inside and just outside, such as computers, furniture, equipment, inventory, important documents, fencing, landscaping, and exterior signs.
4. Business Interruption Insurance
Business interruption insurance is a type of coverage that replaces business income lost due to a covered business interruption event. For example, if a tree falls on the business’s roof and it needs to shut down for repairs, business interruption insurance could help cover operating costs. Common expenses covered by business interruption insurance include revenue, mortgage, rent, lease payments, loan payments, relocation costs, taxes, payroll, and training costs.
5. Employer Liability Insurance
Employer liability insurance is a policy that handles claims from employees who suffer job-related illnesses or injuries not covered by workers’ compensation insurance. This type of liability insurance does not cover legal expenses that stem from employee lawsuits due to sexual harassment, discrimination, or wrongful termination.
6. Commercial Auto Insurance
Organizations that own or use vehicles for their business generally require commercial auto insurance. This type of policy usually includes coverage for two types of physical damage: collision loss and comprehensive loss. It also includes two types of liability coverage: bodily injury coverage and property damage coverage.
7. General Liability Insurance
General liability insurance protects organizations from “general” claims that involve bodily injuries or property damage. This policy can cover attorney fees and medical expenses resulting from an incident in which the organization is held legally responsible. General liability insurance does not cover employee injuries, workmanship, auto accidents, professional mistakes, intentional acts, or punitive damages.
8. Cyber Liability Insurance
Cyber liability insurance protects organizations against data breaches and similar cyber security issues. With this policy, businesses can recover lost income due to a cyber event, pay for the cost of notifying customers affected by a breach, cover the cost of recovering compromised data, and pay for similar expenses.
Request an Insurance Quote
At Atlas Insurance, our professional insurance agents have extensive experience assessing business risks and providing guidance on reducing the probability of risk events by acquiring the right insurance policies. To learn more about our commercial lines of insurance or request an insurance quote, reach out to Atlas at (808) 400-6634.