Every small business is subject to risks, which can lead to a “loss exposure”. A loss exposure is any possibility of financial loss due to loss of use, damage, or financial claim against you or your small business. Businesses that analyze the four most common risk management areas related to their business — and customize their insurance policies accordingly — have the most protection against loss exposures. The four types of loss exposures that small businesses face are 1) liability loss exposures, 2) income loss exposures, 3) people loss exposures, 4) property loss exposures.
- Liability Loss Exposures. Liability loss exposures stem from accidents, whether intentional or accidental, or civil or criminal. General liability insurance, E. & O. insurance, professional liability insurance, employee practices liability insurance, directors liability insurance, and automobile liability insurance are the most common types of liability loss exposures business insurance.
- Income Loss Exposures. The most common types of income loss exposures business insurance policies are loss of income insurance, loss of income extra expense insurance, life insurance, business interruption insurance, and disability insurance. Income loss exposures affect the financial cash flow of a small business. For instance, claims or losses of income may be from loss of sales, rents, or tuition or due to an injury, sickness, disability, or loss of employment.
- People Loss Exposures. Human or personnel loss exposures, or people loss exposures, arise from injuries (or death) to employees, third parties, or volunteers. People loss exposures include the possibility of a loss to a small business from a disability, injury, resignation, death, or retirement of employees. Disability insurance, workers compensation insurance, medical insurance, long-term care insurance, prescription drug plans, and Medicare supplemental insurance are just a few of the most common types of people loss exposures business insurance policies available.
- Property Loss Exposures. Property loss exposures are perhaps the easiest to understand due to the tangible nature of many of the claims. For example, property loss exposures claims may arise from losses to your building, automobile, inventory, tools and equipment, and furniture. For instance, if a fire destroys your office building, it is called a property loss exposure. Property loss exposures can also extend to intellectual property and your small business’s accounts receivables and accounts payable. There are a number of property loss exposure insurance policies, including automobile insurance, business property insurance, fire insurance, contractor’s tools and equipment, inland marine insurance, and intellectual property policies, to name just a few.