Posted on May 17, 2014
Within commercial insurance coverage, the term ?high risk? can have different meanings. But the one fact that is standard throughout the insurance industry when it comes to high risk is that it typically defines a business that because of its industry or claims history is considered risky for an insurance company to provide coverage.
High risk businesses can often be difficult for brokers to place. Companies within the construction and food industry, for example, have more risk because these two industries in particular frequently experience claims and lawsuits. This translates to more risk for insurers and often higher rates for companies working in these industries. That is if the insurance companies will even extend coverage to these businesses.
When companies are brand new without any history, in a field known for extensive claims or have already experienced large losses or claims, they sometimes cannot find an insurance company that will write policies for them. When that happens, they must apply for coverage with an excess or surplus lines carrier.
Surplus lines insurance companies will provide commercial insurance coverage to hard to insure or high risk companies that standard insurers will not touch. One advantage to excess insurance is that this market can often work with the broker to design customized coverage and pricing that will meet the needs of the business.
Another option for those in high risk industries who are able to obtain business insurance coverage is to apply for an umbrella liability policy. Umbrella insurance offers additional insurance amounts over and above standard liability policies so that higher limits may be purchased to fully protect the company?s assets. This is the most economical means for companies to augment their general liability coverage.