Most people make the effort to schedule or conduct regular “audits” of aspects of their life whether it be personal finances, physical fitness, estate planning or otherwise. That discipline should also be adopted for an individual’s insurance needs. All too often people, whether in their personal life or for their business or company, obtain insurance for the reasons they believe they need coverage, and in an amount which they believe sufficient. They usually “set and forget” their insurance and do not review their policies. However, circumstances in a personal life or a professional business frequently change, whether planned or not. For example, the growth of one’s family typically requires additional coverage for life, health or disability insurance. Of equal importance, the growth of one’s business raises the need for general liability insurance, employment liability insurance, and umbrella or excess coverage insurance. These should also be internally reviewed or “audited” on a regular basis.
With specific regard to one’s business, commercial or professional liability insurance policies contain numerous coverage exclusions. It is not only important that the insured understand which exclusions exist in each policy and therefore apply to the coverage, but also whether there exists supplemental insurance available by endorsement to “cover over” any policy exclusion. All too often a business owner, as the insured, only realizes after they have been sued or suffered some drastic accident that their business does not have the proper type of insurance coverage. Similarly, they may only then realize they do not have an adequate amount of coverage, or that their insurance is denied due to an exclusionary clause in the policy of which they were unaware.
For these reasons, the best practice for any business is to maintain a regular schedule for reviewing or “auditing” the company’s insurance portfolio for types of insurance the business may need. Such a procedure also would include a review as to whether you should obtain supplemental coverage by way of endorsement to “cover over” any policy exclusions. Performing such regular insurance audits will help you update and maintain the proper types and limits of coverage that best fit the size and type of your business. As the lifecycle of your business grows, changes and evolves, you should schedule to consult your legal advisor and/or insurance broker on a periodic basis to assist you in internal insurance reviews.
Author: Timothy D. Lyons