Think about organizing a huge music festival. Or perhaps you own a business that processes sensitive personal information from customers on a regular basis. Regular insurance policies work well to cover regular risks, like a fire in your office or a slip and fall incident. What if, however, the big-name band cancels? Or what if hackers infiltrate your firewall?
This is where specialty insurance comes in. It fills the gaps that standard coverage leaves, and protects the risks that are unique, high exposure, and abnormal, and are often disregarded by traditional policies.
In this guide, we will define specialty insurance and describe the various categories and assist you in determining if your business or personal belongings require this additional protection.
What is Specialty Insurance?
Specialty insurance is the category of coverage that traditional insurance companies often will not offer for unique, high-risk or non-standard requirements. A regular insurance policy will meet the requirements of most people or businesses. However, specialty insurance is designed for those with “special” risks.
To illustrate, imagine getting a business suit fitted. Standard insurance is like a suit off the rack that fits most people reasonably well. Specialty insurance is like a bespoke suit tailored to a unique body type or a specific occasion.
Specialty insurance is often written in the Excess and Surplus (E&S) lines. This segment of the insurance industry is ‘non-admitted’, meaning it is not as strictly regulated by the state as standard carriers. This gives E&S insurers a lot of flexibility to take on higher risks and design creative policies without state approval on every rate change.
Because specialty insurance covers the unique, the list of available policies is long, and may vary greatly. Below are some specialty policies some companies may have.
Cyber Liability Insurance
As we continue to evolve digitally, liability policies standardly have exclusions for data breaches. Cyber insurance covers the cost of hacking, ransomware, data recovery, and notifying customers of breaches.
Directors and Officers (D&O) Liability
Provides protection to the personal assets of directors and officers of a corporation involved in management and sued for wrongful acts. It is essential to lure talent to a company’s board.
Professional Liability (Errors & Omissions)
As consultants, architects, and real estate agents, those in professional service businesses face lawsuits for negligence or for not performing their other professional duties.
Event Cancellation Insurance
Weddings, concerts, and other events are protected financially in case the event is canceled due to circumstances beyond anybody’s control, like a storm or a problem with the location.
Marine and Aviation Insurance
Most standard auto and property insurance plans do not insure boats, cargo carriers, or private airplanes. Such plans are designed for the special circumstances of water and air travel.
High-Value Homeowners (or “Umbrella” Policies)
If you own a historic home, a collection of valuable art, or high-end jewelry, the standard limits that homeowners insurance provides can be inadequate. Specialty insurance can help.
Who Might Consider Specialty Insurance?
You might think to yourself “is this really necessary?” However, for people whose situations exemplify the categories below, the answer is more likely to be yes.
Heightened Business Risk: Construction, nightlife and private security deal with a level of risk that is likely too high for a standard carrier.
Distinct Professions: Specialized service and advice providers, including tattoo artists and financial advisers, operate with a higher exposure risk that is likely not covered with a general liability policy.
High Net Worth Individuals: Lawsuits are always a risk, and with your assets exceeding the liability limits of standard auto or home policies, you are a candidate for excess liability coverage.
Organizers of One Off Events: Fundraising events, concerts or large tournaments fall within a specific coverage policy for each day of the event.
Why is Specialty Insurance Important to Consider?
It’s important to keep in mind that the purchase of specialty coverage can be seen as a risk management strategy rather than “buying more insurance.”
Gap Protection: A standard coverage policy protects you from the gaps that standard insurance has, as a result avoiding the financial burden of a claim that a coverage policy has not addressed.
Customization: Policies are flexible and can be structured so that the limits and exclusions can be determined to fit a specific risk profile.
Expertise: Insurers that specialize in a certain area are able to be more knowledgeable in that field. A marine insurer has in depth understanding of maritime law compared to a generalist insurer, which means that you will receive more assistance with a claim.
Choosing a policy
Finding specialty insurers can be tricky due to policies that are not uniform. Here is a method to help you find coverage that fits your needs:
Evaluate Your Risks: Inspect your operations. Do you store data? Do you provide advice to clients? List any unique assets you may have. Write down the risks that concern you the most.
Speak to a Specialist Broker: Specialty insurance often necessitates the use of a broker, and is not like purchasing auto insurance online. Specialty brokers are familiar with the Excess and Surplus (E&S) lines, and have access to insurers that you cannot approach directly.
Assess the Insurer’s Financial Strength: Because of the lack of state guaranty funds which means claim payouts are sink or swim, you should select a provider with a strong E&S reputation and a good A.M. Best rating.
Know the Exclusions: Specialty policies can be unique and exclusionary. Understand the risks of your coverage before you sign.
Safeguarding What Is Most Valuable
Protective insurance understands that the world does not work with a single mold. It does not matter if you are covering a board of directors, a vintage car collection, or a software company, there is probably a policy tailored to your specific requirements.
Completing a claims form is the worst way to discover gaps in your coverage. Examine your particular risks, and consult your broker about specialty lines. They may offer the specialty lines to cover the gaps you didn’t know existed.