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Risk-specific insurance policies provide protection for businesses and individuals against certain identified exposures that might not be covered by a traditional insurance policy. Traditional insurance policies often cover all risks unless the risk is specifically excluded by the policy. By contrast, a risk-specific insurance policy covers only those risks that are specifically identified as being covered by the policy and are designed to cover specific, narrowly defined risks. Examples of these are environmental liability, cyber risks, and title insurance. While these risk-specific policies generally are more expensive than traditional insurance policies, they can be used to fill coverage gaps in an insured’s insurance portfolio.
What Are the Advantages of Risk-Specific Insurance Products?
More conventional policy platforms, like general liability, employment practices liability, and Directors & Officers (D&O) policies, limit coverage in ways that create coverage gaps that can be filled by risk-specific insurance products. [BD5] For example, a traditional employment practices liability policy will provide coverage for a discrimination or harassment claim, but will not provide coverage for wage-and-hour claims. A separate wage-and-hour endorsement or policy may need to be purchased to cover such risks. Understanding and addressing these limitations in your coverage landscape can help you avoid problems when claims arise.
How do I Know if I Need a Risk-Specific Insurance Product?
Payne & Fears can help clients determine what, if any, risk-specific insurance products are appropriate for your business. This starts with understanding your business and the industry in which it operates. A homebuilder faces different risks from a restaurant owner; understanding the risk profile of your business is key to reducing your coverage gaps. For example, the contractor may want to purchase a builder’s risk policy to protect projects under construction from property damage due to things such as fire and vandalism. A restaurant owner, on the other hand, does not need this kind of coverage. Instead, the restaurant may want to obtain risk-specific insurance to protect against things such as spoilage of perishables or food contamination. There are many different risk-specific insurance products available on the market and it is important to compare them against the risk profile of your business and industry.
What Kinds of Problems Occur With Risk-Specific Insurance Products?
The coverage provided by risk-specific insurance products, like any other insurance product, depends on the language of the policy. Because risk-specific insurance products are designed to cover only those risks specifically identified in the policy, it is important to understand the details of the coverage you have purchased. Many coverage battles center on whether the claim or loss falls within the coverage parameters defined by the policy language and whether the insured complied with the policy’s technical requirements, including tendering the claim or loss on time. Payne & Fears is experienced with assisting policyholders in navigating the nuanced contours of risk-specific insurance products.