Corporate Insurance

Corporate Insurance

Corporate insurance provides businesses with protection against unforeseen circumstances to mitigate risk. Browse Investopedia’s expert-written library to learn more.

Corporate Insurance

Errors and omissions insurance E&O form.

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The biggest determinant of whether the current account is in a surplus or deficit is a country’s trade balance. During a strong economic expansion, import volumes typically surge and, if exports are unable to grow at the same rate, the current account will be in deficit. Conversely, during a recession, the current account will show a surplus if imports decline and exports increase to stronger economies. Exchange rates are another variable that can impact the current account.

Blanket honesty bonds, also known as commercial blanket bonds, protect employers from losses due to dishonest acts of employees. That makes it a type of employee dishonesty bond. The bond’s main benefit is that it prevents small companies from going bankrupt due to a single employee’s dishonesty.

A business can be forced to close in the wake of a natural disaster or other life-threatening event. Property insurance often covers lost income while a business is closed due to property damage, but doesn’t always contain provisions that protect a business that is unable to reopen after an evacuation. A civil authority clause in an insurance policy outlines whether or not lost income will be reimbursed when a government entity denies access to covered property.

As well as PR incidents—the arrest of a prominent board member—and international threats—customer data breaches or computer network invasions—crisis management coverage is also used to cover expenses related to restoring confidence in the security of the insured’s computer system in the event of a cybersecurity or data breach. It also covers reputational threats such as product contamination or recall, terrorism and political violence, natural disasters, workplace violence, and adverse media exposure.

Properties covered by a business owner policy, or BOP, typically include buildings that are owned or rented; additions or additions in progress; and outdoor fixtures. The policy will also cover any business-owned items or any items owned by a third party but kept temporarily in the care, custody or control of the business or business owner. The business property must usually be stored or kept in qualifying proximity of business premises (such as within 100 feet of the premises).

Valuation reserves are calculated using an asset valuation reserve and an interest maintenance reserve to separate valuations in equity versus interest gains and losses. These reserves are mandatory under state law to protect against the natural fluctuations in the value of investments.

Account Current Underwriting Income Adjusted Net Worth Transfer of Risk Loss Cost Business Net Retention Wear and Tear Exclusion

The account current, which is necessary to reconcile the accounts between an insurer and an agent, is a summary statement of an individual insurance agent’s business over a specified period. Gross premiums, agency commissions, the net payable amount on the current statement, and payments made or received between each submittal of the accounting are among the items included on the account current.

Underwriting income—the profit generated by an insurance company—can indicate how much new business an insurance company is bringing in or how well its risk analysis process is in predicting the number of insurance claims needing to be paid out.

Adjusted net worth is calculated by estimating the value of the business on the company’s books and adding unrealized capital gains, capital surplus, and voluntary reserves. The calculation is a useful way to compare the company’s relative value to other insurance companies.

The basic business model of the insurance industry is the acceptance and management of risk. A transfer of risk shifts responsibility for losses from one party to another in return for payment. This system works because some risks are beyond the resources of most individuals and businesses.

Loss cost is the total amount of money an insurer must pay to cover claims, including costs to administer and investigate such claims. When determining what insurance premium to charge a policyholder, insurance companies factor in the loss cost.

Business net retention, which indicates a business’s ability to manage risk and remain profitable, is a measurement of a company’s growth and strength during a specific period. In insurance, it is the number of policies remaining after canceled, lapsed, or ceded insurance plans are deducted. The measure represents the company’s policy turnover, with only profitable policies kept for the long-term.

The list of exclusions in an insurance policy can be extensive. One such provision, the wear and tear exclusion, specifies that losses due to normal deterioration of the insured property are not covered.


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