5 Questions Every Business Owner Should Ask About Their Insurance Policy
1. Does the policy have eroding policy limits?
The amount of potential insurance coverage provided under some policies is reduced (eroded) by the attorneys’ fees and expenses associated with defending claims, which can be substantial. If you have a policy with eroding limits, you may want to consider increasing the coverage or switching to a policy which does not have eroding policy limits.
2. Is the potential coverage provided an amount per occurrence or a total amount per policy period?
If the potential coverage is an amount per policy period, it is conceivable that the entire potential coverage could be exhausted by one claim, especially if the policy has eroding policy limits.
3. Does the policy provide the same coverage for any and all claims which may be asserted against your business?
Some policies provide significantly different amounts of potential coverage depending upon the particular type of claim being asserted against your business.
4. Is the policy a claims made or an occurrence policy?
Some policies only provide potential coverage for claim made during the time the policy is in force. These are known as claims made policies. Other policies provide potential coverage for any event which occurs during the time the policy is in force, even if no claim is actually asserted during the time the policy is in force. It is important to know what type of policy you have in place and to keep this in mind when switching insurers or buying coverage from year to year as it is possible you could find your business in a situation with no potential coverage for a claim related to an event which occurs during the time one policy is in force but for which the claim is not actually asserted until after the policy is no longer in force.
5. Does the exhaustion of the coverage provided by the commercial general liability policy immediately trigger coverage under the excess insurance policy?
There are situations in which the exhaustion of coverage for a particular type of claim under a primary policy of insurance does not automatically trigger coverage under an excess policy of insurance. Any such gaps in coverage between two such policies could mean significant potential exposure for your company.