Business insurance often requires more paperwork that personal insurance does. Many new business owners question this, but there are some very good reasons why this is the case. The answer isn’t simple, there are many reasons why business insurance requires more paperwork than personal insurance and here are some of them.
- Additional Risk
Businesses interact with more individuals on a day to day basis, therefore, there is greater risk that something will happen and your insurer will have to make a payment. To minimize this risk, the insurer is likely to ask for more information to conduct a greater risk assessment, analyze the potential risks and determine what costs they could have.
An example of this is vehicle insurance. If you have drivers out delivering goods to customers, then you have a greater chance of something happening than an individual who drives to get from home to work. Another example would be a shop or leisure facility with numerous customers attending per day which is going to be a greater risk than an individual’s home.
- To Understand Obligations
Personal insurance often has less obligations than business insurance. The more obligations that are made on your business to keep the insurance valid, the more paperwork that is needed to ensure that you and other members of your staff understand their responsibilities and are aware of the implications of ignoring these requirements.
For instance, you might not be covered in case of a breach of online security if you openly advertise your passwords and usernames online. Or you might not be covered from a road accident if you employ someone who has too many driving violations. If these aren’t listed in documentation you read, then the insurer would take a greater risk. If it is, then a fair standard for when you can claim is established.
- There Are More People Involved
When you are insuring an individual person or a household there are usually only a few people who are legally responsible, usually only one or two. However, when you are considering a business, especially a large business, there are many different people that could cause a claim to be made. These people need to be identified in the paperwork, either by name or by their position.
This helps to cover the business should the employee not be on the premises, i.e. at a trade show, customer location or another place that is outside usual working locations.
When insuring a household, the insurer will only cover them while in the property. If the individual wants to cover themselves elsewhere, then the individual will often take out additional insurance like travel insurance.
- More Assets to Cover
Personal insurance usually only covers building, vehicles or contents. Business insurance can contain a number of other assets including key person, machinery and revenue. This can mean that you need paperwork to describe what exactly is covered in the policy, how much it is valued at, what eventualities are covered for and when payments can be made. Also included in the policy are factors that would invalidate any claims.
Personal insurance can also cover additional assets, but these aren’t normal and will require specialist policies.
Business and personal insurance are not the same. They require a different system to analyze and assess the risks. At the same time, conditions are going to be vastly different. This often results in lengthy paperwork so that all stakeholders understand their responsibilities.
Do you understand all the terms and conditions in your latest insurance paperwork? Do you need help to understand it all?
Let us know in the comments below.