As a business owner, you likely have policies piling up. After so many years, is it safe to simply discard the paperwork? The answer is not always. For certain types of liability and property policies, such as home, auto, and umbrella, you only need to keep the most current coverage summary page, a document known as “declarations.”
Most business insurance companies will also maintain an electronic copy for several years. Also hold onto the policy booklet and replace it as you receive updated ones from your insurer. Learn more about the various policy types and how long you should keep them.
Commercial Auto Insurance
If you use a vehicle for work purposes, your personal car insurance may not be enough to protect against potential problems. Businesses rely on commercial vehicle insurance to cover any cars, vans, or trucks used in conducting their business.
Just like a personal auto policy, commercial auto insurance provides coverage such as collision, liability, uninsured motorist coverage, and medical payments (personal injury protection). As an occurrence-based policy, you want to keep your commercial auto policy forever. However, maintaining the declarations document is usually sufficient to prove coverage.
The Defense Base Act (DBA) provides contractor employees who work under government contracts outside the U.S. with workers’ compensation-type insurance coverage. The DBA provides medical treatment and compensation to employees of contractors who become injured in the course of employment.
As DBA insurance provides continuous coverage until it is canceled, it is best to keep the policy papers as well as any amendments until the coverage is cancelled. Once cancelled, shred the policy as it will likely contain a great deal of personal information.
Directors and Officers
Directors and officers liability insurance is a type of insurance that covers directors and officers against claims made while serving as an officer or on a board of directors. For smaller businesses, D&O claims may not occur very often, but when they do it can be financially draining to fight the lawsuits. You can generally discard a directors and officers policy after the term or after receiving a replacement policy.
Errors and Omissions
Errors and omissions (E&O) insurance provides business owners with protection against claims of negligence or failure to perform professional duties. There are many people that can benefit from E&O insurance, including lawyers, financial advisors, accountants, real estate agents, consultants, financial advisors, architects, and engineers.
As anyone can sue your business if they feel like they have been harmed from your product, E&O insurance is a must for professionals who offer services. If you have this type of insurance, hold onto the policy until the coverage ends or is cancelled. Just like a D&O, you can safely discard the policy after the term or after receiving a replacement policy.
General liability is a type of coverage most businesses must have for their own protection. Policies can help ensure that you do not have to pay the hefty expenses of out-of-court litigation, settlements, or judgements awarded by the courts. General liability insurance for businesses helps safeguard business owners against unexpected risks that could result in financial disaster. Keep your general liability policies forever to remain protected against the unknown.
Medical Malpractice Coverage
Medical malpractice insurance, otherwise known as medical professional liability insurance, protects physicians and licensed health care professionals from liability in association with wrongful practices that lead to property damage, medical expenses, or bodily injury. It is wise to never cancel your medical malpractice insurance policy to avoid leaving yourself exposed to future problems.
Commercial property coverage protects a business from major financial loss in the event of property damage. Whether you own your own building or lease your workspace, property coverage is needed to protect your physical assets. While policies can vary, most include specific events that may lead to a loss, such as a fire that destroys your building and contents.
In addition to the building itself, property insurance covers furniture, equipment, inventory, landscaping, and even your outdoor sign. It is best to keep your business insurance policy or at the very least the declarations page.
Umbrella Liability Insurance
Umbrella liability insurance is designed to protect business owners from major lawsuits that could wreak havoc on their assets and financial future. This type of extra liability insurance provides additional liability coverage above the limits of current policies and will usually kick in once existing liability policies have been exhausted.
Umbrella liability insurance can also provide coverage for claims that may not be covered by other liability policies, such as slander, false arrest, or libel. Like other occurrence-based policies, you should keep your umbrella insurance policy forever.
When to Retain Insurance Policies
Many companies have implemented records retention policies to ensure that they remain protected under essential business insurance policies. Occurrence-based liability insurance policies, such as business auto and commercial general liability, may be triggered far after the policy has expired. For this reason, occurrence-based liability policies should be retained forever and should not be discarded or destroyed.
While it is also wise to retain property policies forever, many businesses choose to retain these policies for a period of six years. This is because property losses are known after they occur so the need to retain these policies for extended periods of time is different than with occurrence-based liability policies.
Claims-made insurance policies, such as directors and officers’ liability insurance and professional liability, are only triggered by claims made against the insured business during the policy period and throughout the “tail” following the policy’s expiration. Most businesses agree that a reasonable retention period for such claims-made policies is approximately six years following the expiration of the tail period.
Other policies, such as workers compensation policies, should be retained forever. While it may be tempting to simply discard all of your business insurance policies, avoid making this mistake. You will want to hold onto these policies and keep them in a safe place where you can easily access them if needed.