Have you ever actually read your company's insurance policies? If you're in a senior finance or risk management role, you should! Insurance policies are essentially contracts, and not understanding your policies, whether it's liability insurance or property insurance, can be disastrous. These days it’s very much part of the job description and you need to be conversant in the ways of insurance for your company.

Why?

1. Our society is more litigious than ever. 

It's not a question of if your company will get sued. It's when. More than 90% of corporations in the United States are involved in some sort of litigation, and many of those companies juggle multiple lawsuits at once.

Some of these lawsuits are legitimate. A company should expect to be sued if their product randomly explodes (like certain cell phones recently and infamously did), or there is widespread fraud throughout the company (like a certain major bank recently lived through). 

But some are less so. Every year companies large and small face completely frivolous lawsuits. NBC was sued for $2.5 million by a viewer who claimed that watching a segment on "Fear Factor" caused him to become disoriented, vomit, and walk into a wall, while a small dry-cleaning business was sued for $54 million after they lost a customer's pants. 

Even though the NBC case was thrown out and the judge ultimately ruled in favor of the dry-cleaner, both companies were out thousands of both dollars and precious time and PR thanks to these lawsuits.

2. You may not be as covered as you thought. 

While some of the cases mentioned above were likely covered by corporate liability insurance, that isn't always the case. You need to understand exactly what your company's policies cover - and what they don't. 

Some insurers are starting to exclude certain risks like cyber security from their general liability policies, so companies will have to obtain separate stand alone policies. Data breaches are becoming more common each year, leading experts to estimate that the global cost of breaches and cybercrime will be more than $2 trillion by 2019. Those costs include legal fees, the cost of notifying clients and helping them deal with the breach, the cost of restoring data and the downtime related to the beach, as well as the cost of investigating the breach. And if your liability policy excludes cyber security, you're out of luck. 

It's easy to get confused when it comes to property insurance as well. After Hurricane Sandy hit in 2012, many companies realized their property insurance policies weren't adequate. Some companies had passed on flood insurance, thinking that since their offices were on a high floor in their building they didn't need it. (They were wrong.) Others didn't realize that they were subject to sub-limits for things like loss of electricity. 

Property insurance policies in particular have careful wording and terms, and if you don't fully understand what everything means, you might be surprised when the time comes to actually file a claim. 

3. Insurance premiums aren't cheap.

Of course, even if you've evaluated your current policies carefully, there is a chance that your company will find itself in a situation where insurance won't help because insurance doesn't mitigate all risk. With that in mind, your company should consider the cost of insurance premiums as you negotiate new or existing policies.

People in senior finance and risk management roles need to play an important part in renewing or obtaining new insurance policies. Senior finance executives can help determine what kinds of policies are needed by evaluating claims from previous years and budgeting for potential claims. Risk management executives can implement risk management strategies, which can often lower insurance premiums. 

But to successfully help, both senior finance and risk management executives must understand the various types of insurance the company needs. 

Now, if you still don't understand your insurance policy after you've read it, don't worry. You aren't alone. Insurance is complicated and nuanced. That's why Illumeo has released two new liability insurance certifications to help you become the expert your company needs.