Business insurance is meant to minimize the risk of financial loss during a time of hardship. As a business owner or manager, you face certain risks on a daily basis that could make it hard to recover if the worst should happen. All buildings are at risk for experiencing a fire that could destroy vital assets. Your company might also be at risk for being held responsible for someone’s injuries that occur on the property. These risks are commonly covered by insurance, but there are a few that are considered uninsurable.
Insurance companies work on the concept that many policyholders pay premiums that spread the risks across a wider area. Essentially, an insurance company can only survive if it’s paying out claims that are lower than the amount collected through premiums.
If all of the policyholders received frequent or high levels of compensation, there simply wouldn’t be enough of the funds to cover everyone. Certain risks are known to potentially lead to this situation, particularly those most companies face on a daily basis or that are known to lead to excessively high losses.
In the insurance industry, there are three types of business risks commonly labeled as uninsurable. Planning to lower your company’s risks for these events and knowing how to handle them can protect your business’s bottom line.
1. Natural Losses
Certain losses of assets are considered natural occurrences during the course of running a business. Restaurants deal with perishable foods that won’t be covered under their policies for normal deterioration that renders them inedible. Clothing may become sun damaged when it’s put on display in windows, and a company that keeps its stock outdoors should be aware of the risk of damage during severe weather. Insurance companies typically don’t cover losses from natural causes because they’re widespread throughout certain industries. However, keep in mind that business insurance policies will typically cover certain types of natural disasters, such as a fire.
2. Damaged Company Reputation
Your company’s positive reputation can drive sales, but there are times when mistakes can lead to the public suddenly viewing your business from a negative perspective. For instance, experiencing a recall of certain products could cause financial losses, but insurance companies might not cover this risk due to the difficulty of figuring out what’s a fair amount to pay for a claim.
3. Trade Secrets
Having a disgruntled former employee release a secret recipe or take a list of clients’ information to a competitor are examples of trade secret risks your company could face. Unfortunately, these are fairly common and often lead to lengthy investigations that are difficult to prove. Insurance companies may also struggle with coming up with a figure that makes sense for this type of claim, since it’s nearly impossible to determine the financial damages caused by a trade secret leak.
Owning a business means assuming certain kinds of risk, but operating without commercial insurance shouldn’t be among them. For reliable, affordable business insurance as well as homeowners, renters, motorcycle, and auto insurance, reach out to the experienced professionals from Altra Insurance Services. Call us today at (619) 404-6311 to find out how we can meet all your insurance needs.