Deciphering UK Vs US Insurance Terminology
As we move into a new year, many start-ups and established businesses alike will be looking to make new international connections. This is particularly relevant as the Brexit Transition Period ended on 1st January 2021 and the country is now looking to forge new trading relationships.
With this in mind, it is essential that all businesses are informed on the implications on trading internationally, including understanding differing insurance terminology. A client in the US is likely to specify in the terms of your agreement the types of insurance that they require a UK supplier to hold.
The names of business insurance products in the UK can be quite complex and it is not always initially clear what the product is covering. A further layer of complexity is added when trading with the US, as many of the products have different names to their UK equivalents and you will want to make sure you have the right policies in place. To make some of these distinctions clearer, we have compiled a guide to some of the most common business insurance product names and their US counterparts. Once you are aware of the name differences, you can then consider, perhaps with a specialist broker, what policies you might need to work with US partners or perhaps extensions of your current policies to account for any additional cover required.
Let’s first consider the overall umbrella term of “Business Insurance”. This is typically used to describe the collection of insurance policies a business might need and it can differ depending on where you are working, what you are offering and whether you employ any staff. Often different packages are available that package up different products into one policy. In the US, it is typically called Business Owners Policy (BOP) or sometimes it is called Commercial Package insurance, which will commonly package up both property and liability cover.
Public Liability Insurance
One of the most important types of policy cover for many small businesses is Public Liability insurance. This cover protects you if a customer or member of the public is injured while on your premises and it also provides protection if you happen to cause damage to a customer’s property while on their premises. Therefore this is an important product for businesses, particularly for those operating in retail, hotels and hospitality. Although this is not a legal requirement, it provides essential cover. Looking to the US and their terminology, the US product is called (Comprehensive) General Liability.
Another important business insurance product for businesses is Contents Insurance. Contents insurance is quite self-explanatory in the sense that it protects the contents of your premises against them being lost, stolen or damaged. This product will help to fund replacements, which is invaluable if you are a small business or have specialised equipment. Contents insurance has recently gained prominence as many businesses find themselves working from home and this cover can extend to when equipment is out of the business premises, although some insurers do charge a premium for equipment taken to the US. In the US, the equivalent policy is called Commercial Property Insurance so it is important to be aware of this difference in case a US customer stipulates you need to hold this in their contract with you.
Employer’s Liability Insurance
If you employ members of staff, regardless of whether that is one or 50, you are legally obligated to hold at least £5 million worth of Employer’s Liability (EL) insurance. This provides protection for your employees if they are injured at work or a long term injury occurs as a result of their work for you. It protects you as an employer by covering compensations costs, although legal expenses may incur additional cost. In the US, this type of insurance is commonly called Worker’s Compensation.
Professional Indemnity Insurance
If you are a business offering services such as marketing, accountancy, coaching or architects for example, Professional Indemnity insurance provides cover if a customer suffers a financial loss as a result of your service or advice. This cover will pay for your legal costs and the compensation fees in events such as breach of sensitive information, damage to goods or information or professional negligence, to name a couple of examples. In the US it has a slightly different name as it is called “Errors & Omissions Liability”.
There is actually a type of insurance called “Protection & Indemnity (P&I) insurance” that exists in the US, however this is not an equivalent to what we call Professional Indemnity Insurance in the UK. This is actually a form of marine legal liability insurance.
Whilst there are differences, there are some insurance products that are known by very similar names such as UK Commercial Vehicle Insurance, which is Business or Commercial Auto Insurance in the States, and Business Interruption, which is known by the same name in the US. Cyber Insurance is also called Cyber Insurance in the US, but is sometimes known as internet liability insurance. Always remember to inform your insurance provider of your international activity so you are insured accordingly and keep this under regular review.
The business insurance sector can be a tricky one to navigate, but make sure you spend time learning about the different policy names if you are operating in the US. This will protect your business, partners and customers and save you money in the long run if a claim is made. When you are clued up on what insurance product is what, you will quickly be able to prove to prospective US partners and clients that you have the right cover in place.