What Are The Risks Of Changing Your Insurance Coverage?
A class action lawsuit, market upswing or fundamental shift in corporate direction are just some of the tipping points when it comes to reassessing your company’s future. In the case of economic pressures, cutbacks are often a quick way to help the bottom line gain some flexibility and stability. If you are looking at a course correction, one of the questions that you may have about your insurance is “What are the risks of changing your coverage?”
A recent Risk Insights by Zywave notes that, “in fact, when budgets are tight, having proper insurance coverage is more important than ever.”1
What Are The Risks Of Changing Your Insurance Coverage Based On Budget?
“Dropping or lowering your coverage may seem like a smart or even necessary move when faced with low funds. However, dropping or lowering coverage exposes your company to the risk of greater financial hardship when you can least afford it. If you don’t think you can afford insurance coverage, then how could you possibly afford a claim or loss? Right now would be the worst time for a significant business interruption or financial hardship—it could be catastrophic for your company.
Related Matters: Insurance Bureau of Canada: Insurance Buying Tips
A smarter option may be to increase your coverage. For many commercial lines, the prices are currently very low, so it could be an optimal time to purchase more coverage. In addition, underwriters do not like to see gaps in coverage. If you drop or lower your coverage now due to monetary concerns, your premiums may well be higher when you resume your normal coverage level.”2
Risk Management And The Risks Of Changing Your Insurance Coverage
“Not only does lowering coverage expose your company to greater risk from a claim, it can also expose your company to possible lawsuits. For instance, if you lower and raise your coverage level year to year based only on price and then have a claim for which you aren’t fully covered, shareholders or claimants could sue you for negligence because the company did not have a strategic risk management program in place. Employers should develop a risk management plan that is based on what their company needs and is applicable to all lines of coverage, and it is important to follow the plan regardless of budget.”3
Changing Your Insurance Coverage – Some Special Considerations
“Certain types of coverage, such as employment practices liability (EPL) and directors and officers insurance (D&O), become even more vital in a tough economy. If your company is laying people off, there is always the risk of someone suing for discrimination or wrongful termination—this makes your EPL coverage essential. Or, if the company takes a big loss or is struggling, shareholders and stockholders are likely to blame the board of directors. It’s important to retain appropriate D&O coverage in case of a lawsuit.”4
Weighing The Risks Of Changing Your Insurance Coverage? Let’s Talk.
We understand that marketplaces are constantly evolving. To adapt to new realities, the risks of changing your coverage need to be thoroughly understood. Across Canada, our insurance brokers can provide you with the most current information about your commercial liability insurance options, the risks of changing your coverage and help you secure a competitive coverage quote.
For A Commercial Insurance Coverage Quote Or To Discuss “What Are The Risks Of Changing Your Insurance Coverage?” Contact An ALIGNED Insurance Broker Today!
|ALIGNED Across Canada 100% Canadian owned, ALIGNED is a premiere insurance brokerage that serves more than 1,400 clients across the country. ALIGNED’s offices in Toronto, Calgary and Vancouver are supported by a national operations centre in Cambridge, Ontario. Uniquely within the industry, ALIGNED creates, negotiates and delivers the best business insurance and risk management strategies/solutions to organizations like yours.
1-4 Adapted from Risk Insights © 2009-2013 Zywave, Inc. All rights reserved. This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.