If you’re like most people, you probably know a bit about insurance. Maybe you have auto insurance, health insurance, and life insurance, along with homeowners’ insurance that protects your dwelling and everyday belongings from theft and damage. But do you know about specialty insurance? If not, you’ve come to the right place. This complete guide will provide a thorough understanding of what specialty insurance is, why people need it, and how to get it.
What is Specialty Insurance?
Specialty insurance is insurance designed for unique or high-risk objects, activities, or situations that fall outside the typical coverage provided by standard insurance policies. It is designed for a particular need and supplied for specific purposes. It is the kind of insurance that covers highly unusual or exceptionally risky cases – those that standard insurance refuses to cover or places limitations on. Specialty insurance provides customized coverage for a range of specialized risks (ie, those that standard insurance policies would avoid or limit) that stretch across various categories, including financial loss from the property, crime, and third-party liability; property damage; unpaid debts; loss of life or illness; offshore marine bonds; information technology coverage for new and emerging technologies; legal expenses related to employment, tax or health and safety matters; travel insurance; motorsport insurance for participants, events and accessories; and even insurance for zombie-related claims (yes, seriously!).
Why Specialty Insurance is Essential
Protection for High-Value Items:
Coverage: Coverage that goes beyond what’s standard on homeowners’ or renters’ policies for specialty items with high value (eg, a priceless art collection, jewelry, antiques, or a rare book collection).
Moderately important: Traditional policies often place limits on the dollar amount they will pay for a category of items, exposing you to financial loss if those high-value assets are damaged, lost, or stolen.
Coverage for Unconventional Risks:
Coverage: Niche insurance can provide coverage for non-traditional or high-risk risks, such as professional liability for specific occupations and event cancellation insurance for specific sports common among higher-risk athletes.
So what? Those risks are precisely why you pay for specialty insurance in the first place. Specialty insurance might seem opaque because there are typically few claims. Also, if you’re unfamiliar with the insurance, the process of filing a claim and getting paid can seem mysterious. And yet, without specialty insurance, you might be left totally unprotected, in cases that obviously are not covered by general insurance policies. This can leave you at enormous financial risk.
Customized Policies:
Coverage: highly tailored to your specific needs and particular exposures (ie you can ‘pick and choose’ your coverage limits and availability) in a way that general policies are not.
Benefit: This flexibility ensures you get the coverage you want, and stop paying for protections you don’t need.
Essential for Businesses:
Specialty insurance: Many businesses carry specialty insurance to cover unique risks relevant to their industry, such as cyber liability, environmental liability, product liability insurance, etc.
Significance: Any company operating in an industry that carries higher degrees of risk or one that provides unique services can be exposed to substantial amounts of financial dislocation without the appropriate specialty coverage.
Common Types of Specialty Insurance
Specialty insurance includes a wide variety of policy types that cover specific, unusual risks. Here are some of the most common types of specialty insurance available:
Professional Liability Insurance:
What’s Covered: Also called Errors and Omissions (E&O) insurance, it protects such professionals as doctors, lawyers, and consultants in the event their services result in property damage or bodily injury to a client or third party by allegations of neglect, error or omission on their part.
Who Should Use It: Anyone who provides professional advice or services, where mistakes could result in a lawsuit or financial loss.
Cyber Liability Insurance:
What it provides: Liability for businesses that experience financial loss due to a data breach, cyber-attack, or other digital threat. Typically, compensation specifically covers attorney legal fees, notification costs, and data recovery.
Why Do You Need It? Any business that collects sensitive customer information or uses a lot of digital systems to get the job done.
Event Cancellation Insurance:
What It Provides: Pays a business, individual, or organization for losses incurred if their events – such as a wedding, concert, or conference – were canceled or postponed for covered reasons, such as extreme weather, sickness, or damage to a venue.
It’s for anyone: 1. Planning any sort of keynote speech, panel discussion, or dinner engagement for which they must spend a non-refundable deposit or fee 2. Coaching high-level business executives 3. Picking a wedding color A cautionary tale: In Tucson, Arizona, a bride-to-be hired a professional designer to create a purple and lime-green bridal arrangement with lisianthus, stocks, and Queen Anne’s lace. Guest florists at her reception were instructed to match the arrangement. But the bride’s florist didn’t communicate with the others, and the colors clashed with her wedding gown.
Collector's Insurance:
What It Does: Offers insurance to cover collectibles that are too valuable to be covered by your standard homeowners’ policy – such as fine art, old coins, wine, or vintage cars.
Who Needs It: An absolute must for collectors who want to maintain the value of their rare and pricey possessions.
Travel Insurance for High-Risk Activities:
What It Does: It can provide coverage for activities that are often not covered by travel insurance (think skydiving, scuba diving, or mountain climbing), or for medical evacuation and the costs of medical rescue.
Who needs it? People who are adventure travelers involved in high-risk sports (particularly in mountainous areas), or going to remote areas where help might be needed.
Kidnap and Ransom Insurance:
What It Covers: Covers expenses associated with kidnapping, extortion, and ransom payments, typically including crisis management services, and help with the negotiation.
Who Should Get It: Good for those actually operating in certain risk areas – the highest incidence of kidnapping and extortion tends to be in the top 20 percent of richest individuals and businesses in a country.
Equine Insurance:
What It Offers: Protects your horses, covering everything from mortality and medical expenses to loss of use and liability for injuries caused by your horse.
Who Needs It: Vital for horse owners, breeders, and those involved in equestrian sports.
Product Liability Insurance:
What It Does: Shields a manufacturer, distributor or other seller from suit for personal injury or property damage occurring as a result of a defective product.
Who Needs It: Perfect for companies that manufacture or sell physical goods, especially those in the food, pharmaceutical or toy industries.
Environmental Liability Insurance:
What It Pays For: Pays for environmental costs, including the cleanup of pollution, legal costs, and any third-party loss of property or bodily injury.
What does it do? Who needs it? The answers are yes, help manage adverse impacts on the environment, and any business operating in an industry that has an environmental impact, whether that’s manufacturing, landfill operation or home renovation.
Marine Insurance:
What It Covers: Covers ships, cargo and other marine assets and provides cover against risks such as physical damage, total or partial loss, theft, hijacking and other perils.
Who Needs It: Crucial for businesses involved in shipping, fishing, or other marine-related activities.
How to Choose the Right Specialty Insurance
In selecting the right specialty policy, it is essential to consider your special risks and needs. Here are some ideas to get you started:
Grade Your Risk: What are you doing, or what do you produce that, although widespread, is not protected by ‘standard’ insurance products? Deduce what type of specialty market you’d fit into.
Work with a Specialist Broker: Because specialty insurance can be complicated, especially in niche areas, visit an insurance broker who specializes in your type of business or the sector of coverage you need.
Read the Fine Print: When purchasing specialty insurance, it’s critical to read the terms of the policy carefully. Pay particular attention to the exclusions, the caps (or limits) on coverage, and any conditions that could prevent you from making a claim to recover your loss.
One of the four Big Qs (which we’ll address in turn) is the Cost-Benefit Ratio: How does the potential cost of a loss compare with the cost of the premium? Most specialty insurance isn’t cheap; think of it, however, as an investment. If a claim actually occurs (and most reinsurance policies are designed to cover only that rare occasion), you can be certain that you’ll thank your lucky stars and the astute judgment of those insurance professionals who steered you toward the right protection for your particular situation.
Review and update: circumstances, whether business or personal, can change, so review your specialty insurance coverage regularly to ensure it’s still appropriate.
Conclusion
A specialty insurance policy is the first line of defense against circumstances that are very likely to occur but are not specifically covered by traditional (ie, off-the-shelf) types of insurance. As a business owner with specialized or inherent risks, a collector of things, or a person who engages in entertainment or extreme sports, specialty insurance can ensure that you have coverage appropriate to your situation when you encounter your worst nightmare. By understanding what specialty insurance is and selecting the most appropriate coverage for your needs, you can remove opportunities for the polite smiles of insurance examiners to turn to looks of indifference as you file an insurance claim.
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