Preventing Coverage Gaps in Commercial Insurance

Insurance policies are designed to protect your business in the event of a covered loss.  There are several types of insurance policies and each will cover a specific cause of loss or line of business.   A coverage gap occurs when a loss occurs and there is no coverage.  No single policy will cover all of your insurance exposures, so multiple policies are written to minimize coverage gaps.

What is a Coverage Gap?

Commercial policies are designed to cover your operations so that insurable claims are covered.  This can mean that you could need additional insurance policies, such as Inland Marine, Professional Liability, Cyber, Employment Practices, Crime, Directors and Officers, or increase limits and coverage on your BOP or Package policies by endorsement.  Knowing what your business exposures are, and how to cover them is important to minimizing coverage gaps.

Your insurance agent is your first line of defense against coverage gaps. At Fixated Financial & Insurance Solutions, we recommend that you have a yearly coverage review with your agent or with us.  Going over your operations helps tailor your commercial policies to eliminate gaps in coverage.  This is another reason why it is important to always notify your agent if you have expanded or changed your business in any way.

Coverage Gap examples

Here are some of the common areas where coverage gaps occur:

• Named Insured – Your policies should ensure that your legal business name and any names that you do business with are reflected accurately on the policy
• Your classification does not correctly reflect the operations of the business
• The policy does not include all business locations
• Not carrying Professional Liability or Errors & Omissions coverage if you are providing services or advice to clients
• Not adding newly acquired companies to current coverage
• Incorrect Retroactive date or no prior acts coverage on claims-made coverage
• No Extended Reporting Period “tail” coverage on canceled or expired claims-made policies – this is especially important if you go from claims-made to occurrence policies
• Not having Employee Benefits coverage if there is a benefit plan or a fiduciary policy
• No Hired/Non-owned auto coverage when there are no owned vehicles
• Not adding Drive Other Car coverage for Executives and employees using company vehicles and who have no personal auto policy
• Not covering mobile equipment (vehicles with permanently attached drills, diggers, loaders, shovels, cranes) under a business auto policy
• Hired auto physical damage not covered
• Not listing incidental states on your Workers Compensation policy, especially for remote workers
• Improper classification of employees as independent contractors
• Ensuring voluntary workers have coverage
• Using leased workers without a contract that establishes who is responsible for their workers’ compensation coverage
• Umbrella or Excess policy does not have all underlying policies scheduled
• No Cyber or data breach coverage – especially for companies that have personally identifiable information or health data stored or in files
• No Employment Practices Liability coverage if there are employees
• No Director and Officers policy for businesses with a board of directors
• Not complying with ERISA requirements
• No adequate limit for Employee Theft/Dishonesty or Crime Coverage
• Not including Ordinance or Law Coverage
• Not including Equipment Breakdown
• Property values for Building, Personal Property, Tenant’s Improvements, Business Income, or Inland Marine too low
• Inland Marine equipment schedules with undervalued or missing items

This is only a partial list of where a coverage gap may occur.  You should always review all of your policy limits to ensure that you have all of your business exposure covered appropriately.

Insurance policies are not one-size-fits-all.  Every business is unique and policies should reflect that, making sure that all exposure areas have coverage.  At Fixated Financial, we will provide reviews of your current policies and go over your business insurance needs with you so we can provide no-obligation quotes to protect your business and prevent coverage gaps.