Company insurance is intended to safeguard the financial assets of a business owner and is a crucial investment for a financial planning agency.
This article will discuss the primary insurance coverage for financial planning businesses, general liability insurance, as well as additional policies that are appropriate for this industry.
Financial Planning Firms Need General Liability Insurance
Every firm, regardless of sector, has risks that should be insured. General liability insurance is the most frequent and comprehensive form of coverage that company owners purchase.
General liability insurance covers the following risks:
Damage to property
Legal defence and decision
Personal and commercial harm
While general liability insurance is not legally needed for companies, operating without it is exceedingly dangerous. If your company is sued, you might face costs in the hundreds of thousands of dollars (or more). The only way to avoid this sort of catastrophe from destroying your organisation is to have an adequate general liability insurance coverage in place to assist pay for these losses.
Common Situations That A Financial Planning Firm’s General Liability Insurance May Cover
Example 1: A new customer comes into your office to talk about financial planning possibilities. While chatting to someone else, one of your staff turns the corner and rushes right into the customer, slamming her back against a desk. She fractures her wrist and requires medical attention. She takes legal action against your firm. Your legal defence expenses will be covered by your general liability insurance.
Example 2: One of your long-term customers goes to the toilet and stumbles on a puddle, breaking his tailbone. He is unhappy about the accident, but he chooses not to sue. He does, however, request that your company fund his medical expenses. His medical care will most likely be covered by your general liability insurance coverage.
Example 3: You get an email from one of your rivals’ attorneys notifying you that the competition is suing your company for libel. You’re not sure how your company may have libelled the competition, but you know you need to get an attorney as quickly as possible to defend your company. In this circumstance, your general liability insurance coverage will cover your legal expenses, including your attorney’s fees and any payment or settlement that may be necessary.
Of course, this is not an entire list of risks covered by a general liability insurance policy, and certain situations may result in a specific peril not being covered. To minimise coverage gaps, it’s always better to speak with your agent about the terms of your policy.
General Liability Insurance Cost
For $1 million in general liability coverage, the typical financial planning business in America costs between $400 and $700 each year.
The cost of your coverage will be determined by a number of variables. Among them are your:
The overall aggregate limit
You may be able to get general liability insurance at a lower cost if you buy it as part of a business owner’s policy (BOP) rather than as a separate policy. A business interruption policy (BOP) is a more complete option that covers numerous types of coverage, such as business interruption and property insurance.
Other Types of Coverage Required by Financial Planning Firms
While general liability insurance is the most crucial, there are various different types of coverage to be aware of. Other forms of insurance that every financial planning businesses should have are as follows:
Insurance for Workers’ Compensation
If you have employees, the state in which you conduct business will almost certainly require you to have workers’ compensation insurance. The coverage will help your company in a variety of ways, including paying for medical care for work-related accidents sustained by your workers. It will also assist in covering injured workers’ missed pay as they recuperate.
Insurance for Professional Liability
Professional liability insurance is tailored to your individual needs. It protects you from responsibility resulting from mistakes or failure to execute. There is always the potential that one of your customers may sue you for failing to perform your financial planning obligations. If you have professional liability insurance, your coverage will cover your legal bills as well as any settlement that may be necessary.
Coverage Options for Financial Planning Firms
In addition to the insurance listed above, your financial planning organisation may need other forms of coverage based on particular elements of your activities. Some of them may not apply to you, so be sure to ask your agent whether policies are appropriate for your company.
Insurance for Commercial Property
The computers, office furniture, and other equipment in your workplace were expensive to acquire, and they would be expensive to repair if they were damaged or destroyed. Commercial property insurance is intended to assist pay for damage to your business’s property caused by an incident such as a fire or severe storm, allowing you to get replacements without paying out of pocket.
Insurance for Data Breach
Data breach insurance, often known as cyber attack insurance, protects your company if it is the victim of a cyber assault. For example, if a hacker compromises your customers’ financial data and one or more clients file a lawsuit against your company, your data breach insurance will cover your legal bills. Your data breach insurance would also cover any payments or settlements necessary to safeguard your company and finish the case.
Additional Security Measures for Your Company
Although investing in company insurance is simple (and necessary), it should not be your first line of defence. Yes, insurance will reimburse your company for cash losses incurred as a result of an occurrence, but it is much preferable to avoid losses altogether.
With this in mind, here are a few steps you can take to better secure your company:
Make use of legally binding contracts and other business agreements. (We provide free templates for several of the most often used legal forms.)
To safeguard your personal assets, form a limited liability company (LLC) or a corporation. (To discover how to incorporate an LLC or company in your state, see our step-by-step tutorials.)
Keep your company licences up to date.
Streamline the internal procedures of your company. This will eliminate unneeded variables from routine activities and establish a secure, consistent environment in which to do business.
If your company is an LLC, you should check into LLC insurance.