Those in the collections industry understand that tracking down outstanding debt is a process fraught with emotion on both sides. The debtor may have a host of reasons for being behind on payment, while the business seeking restitution just wants to claim what they’re owed. As the player in the middle, collections agencies need to make sure their own interests are also protected. That’s where insurance comes in.
Protecting your own finances
As a debt collector, you’ve seen how quickly losses can mount, and how one incident or stroke of bad luck can completely change someone’s financial liquidity or security.
The same devastation could strike your firm following a lawsuit, accident or other significant loss if you don’t have the right insurance. Here, we’ll explain the critical types of coverage a collections firm needs.
Professional liability — also called errors and omissions or E&O
This type of insurance should be top on any debt collector’s list. It will cover your legal defense if your professional services or recommendations are called into question or someone claims you didn’t deliver as expected. The coverage protects you, the firm and all your employees if sued by a client, debtor or other party for negligence, a mistake or failure to follow professional standards. It will also help pay any settlement or court judgment against your company.
But be aware that E&O will not cover you if you intentionally cause harm or are found guilty of a criminal act.
CGL covers any bodily or physical property damage that you or your employees might cause at an off-site location during the course of doing business. Although less likely, it also protects you from major expenses related to bodily injury or damage to physical possessions that another person suffers as a result of visiting your place of business. Lastly, CGL will help pay any legal costs associated with a claim, as well as medical expenses, repair and replacement costs, and settlements owed.
This type of coverage kicks in if the physical assets of your collection agency are damaged or destroyed. It will cover the cost of repair or replacement, either at actual or depreciated value, depending on the details of your policy. This includes incidents that impact the office building or workspace itself, as well as the contents within it, whether you rent or own.
It can be easy to underestimate the value of what you own, so be sure to give your insurance provider a complete inventory of your office furniture and supplies when establishing your policy. Also be sure to discuss any exclusions. Property insurance policies typically do not cover damage caused by floods, earthquakes or sewer backup. These can be added as an addendum or stand-alone coverage as needed.
Be aware that you may also need a special addition to your property insurance if your business holds moneys or securities owned by others. A similar addition to your policy can cover valuable papers and records.
Money tempts, which means every collections agency definitely needs to carry crime insurance. This type of policy generally covers instances of employee dishonesty, transfer fraud, forgery or alteration, and theft of client property.
It does not cover any actions of the owner or partners, only those of hired employees. Nor does it address liabilities stemming from criminal activity or accounting errors. Before purchasing any policy, be sure to understand what’s covered, what’s not and what limitations apply.
As a collections agency, you know that confidentiality is king. Unfortunately, cyber crimes are becoming more common, and online criminals are constantly developing sophisticated schemes to outsmart security. With more and more business being conducted remotely, cyber liability insurance is essential. If your digital data is compromised and this results in financial harm to others, cyber liability insurance will pay for data breach response costs, legal fees, monetary damages to victims and more.
Depending on how many collection agents you employ, you may be required to purchase workers’ compensation insurance. Workers’ comp covers the costs of work-related injuries and illnesses, regardless of who is at fault. Each state has its own rules and regulations regarding workers’ comp, so be sure to talk about your employee payroll with your agent to make sure you don’t have any gaps.
You and your employees may spend a lot of time on the road tracking down information and debtors. Don’t assume that only company-owned vehicles require commercial auto insurance. If personal vehicles are being used for any aspect of your business, auto coverage is essential. Call or email your JAISIN insurance advisor about nonowned auto insurance if your employees use their own vehicles or rental cars for work.
Though debt collection is a fairly low-overhead business, it does expose you to potentially damaging liability and property losses. The best way to protect your company is through comprehensive insurance and thoughtful security measures.
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