If you’re like most Americans, your family lives paycheck to paycheck. Unfortunately, that means you probably can’t afford to buy all the insurance you need. You are not getting coverage for all the potential perils that can befall your life and assets.
Still, insurance is vital; you should try to get as much as possible. There are five common types of underinsurance. Knowing what they are can help you ensure you have the protection you need when an accident or disaster strikes.
Medical Malpractice Insurance
Indeed, your medical malpractice insurance premiums may be part of your hospital or doctor’s fees. However, these costs are often just a portion of what is needed to cover costs if something goes wrong. The vast majority of states require that healthcare providers carry medical malpractice insurance.
Medical malpractice insurance can cost up to several hundred dollars per month, depending on your state. However, some companies offer discounted rates if you have multiple policies.
The minimum amount you should have is $250,000. Also, for high-risk practices like OB/GYN and psychiatry, you should carry at least $1 million in coverage.
If you do not have enough coverage, your risk of being sued dramatically increases.
General Liability Insurance
This protects you if someone gets hurt on your property or if you accidentally cause damage to someone else’s property. For example, a visitor may slip and fall on a store shelf and wants to sue. General liability insurance will protect you from those costs.
If there is an accident in your office and a computer is broken, general liability will also cover that. General liability policies can also cover defense costs if an employee or visitor sues or claims injuries sustained at work.
Umbrella Insurance
Umbrella insurance is a type of personal liability coverage that acts as an extension of your existing liability insurance. It protects you from financial ruin if you are sued for damages over what your other insurance policies will cover.
By opting for umbrella insurance coverage, you can rest easy knowing that should something catastrophic happen due, you have protection. It comes in even when it is due to negligence on your part or someone else’s. It also helps protect your family and loved ones from losing their home and other assets in a lawsuit.
The liability coverage you need depends on how much money you make and your assets. If your household income is low, $1 million in liability coverage may be sufficient. However, if your household income is high (over $250k), $2 million in liability coverage might be more appropriate.
As long as no other significant policies cover these things, umbrella insurance will be very important.
Product Liability Insurance
If your business sells a product, you need to ensure enough insurance to cover the damages it causes. Even if you think you don’t need product liability insurance, there’s a perfect chance that your bank thinks otherwise. Most banks won’t loan money to businesses without it.
If no one will take a risk on your financial security, why should you take one on their products? The first thing to consider is the type of business in question. Do they have a product that they sell, manufacture or distribute for sale or free?
You need to then consider the risks you take with producing and selling every day. For example, a baker will need such insurance intensely because anything could go wrong with the bread and customers. A mistake with the mixing is enough to send a customer coming to sue the business.
On the other hand, a novelist may not need this insurance. Though a novelist is a producer (writes novels), there is all certainty that his customers will receive satisfaction. For someone like him, it’s entirely not worth it.
Errors & Omissions Insurance
E&O insurance covers you if your advice or decision-making causes harm to someone. This type of coverage is especially critical if you are a financial planner, accountant, lawyer, marketing consultant, or other professional. These are people who work with clients on a one-on-one basis.
Errors & Omissions insurance is available as a stand-alone coverage, and it’s an add-on to other policies like General Liability insurance. It’s worth noting that there are two types of errors & omissions coverage: claims-made and occurrence. Claims-made policies cover you only when a claim is made against you during a policy period.
Occurrence policies cover all incidents during a policy period, regardless of whether they result in a claim against you. Ensure you know which type of policy you have before purchasing additional E&O coverage. You can check by looking at your policy declarations page.
If you need more protection, consider adding an endorsement (an addition to your existing policy) or increasing your deductible. Doing so will lower your premium cost. Also, note that some states don’t allow insurance companies to offer E&O endorsements.
In those cases, you may be able to get additional protection through a rider. A rider is simply a separate document attached to your policy that expands its terms.
Conclusion
The five points above are common underinsured packages. To wrap up, consider these minor policies that are also underinsured and require primary coverage.
- Business Interruption Insurance: Business interruption insurance covers losses resulting from a disaster or other unforeseen event that interrupts business operations. It kicks in when you have no income because of lost revenue during repairs, relocation, etc. A policy covering loss of profits may be a part of some business interruption coverage.
- Property Insurance: Property insurance protects against physical loss or damage to property owned by your company. Most standard commercial property insurance policies include buildings, furniture, inventory, and equipment protection.
- Workers Compensation Insurance: Workers’ compensation pays medical bills and lost wages for employees injured. It also includes death benefits for dependents of workers killed on the job in most states. Some states require employers to carry workers comp; others don’t. In many cases, you must carry a minimum amount of coverage. Even if your state doesn’t require it, you should consider buying workers’ compensation.
