Insurance tips for mergers and acquisitions

A nationwide study found 75 percent of U.S. businesses were underinsured. If you’re among this majority, you leave your business vulnerable if you suffer a significant loss. As you review your business plan—whether or not you’re involved in a business deal—make sure you adjust your insurance coverage as your business evolves.

Mergers and acquisitions generally help widen product offerings and services for one of the businesses involved. As a buyer in these types of deals—with additional property, products, equipment, services, and possibly employees under your responsibility—you need to update your insurance policy to cover these new assets. These business transactions can impact your property, general liability, workers’ compensation, professional liability, and commercial auto coverages.

Use this checklist as you review and update your policy. Don’t let a lack of insurance lead to uncovered claims that impact your bottom line.

Both businesses involved in a merger or acquisition need to review their insurance schedules and coverages to ensure neither will experience gaps in coverage. Review the following information and contact your provider to update as needed:

• Effective dates

• Expiration dates

• Policy limits

• Premiums

• Deductibles

• Discounts

• Insureds and additional insureds

Mergers and acquisitions are often complex business interactions involving multiple individuals with differing interests. As a business owner, you need to pay attention to specific insurance coverages you might otherwise overlook when operating independently.

Let's review three key coverage options and learn how they can impact your business.

This coverage helps protect you—along with your personal assets—if an employee, vendor, competitor, or customer accuses you of wrongful acts in managing your business, including:

• Errors in managing employment-related matters

• Reporting errors

• Inaccurate information or disclosures

• Regulation violations

You can also help reduce your risk in these matters by practicing due diligence. Review all pertinent information, ask questions, and ensure all of the details are accurate regarding your business before sharing with others.

Change in control is a provision often found in directors' and officers' policies. In fact, you may already have this provision as part of your current policy.

Change in control outlines how you're covered for wrongful acts in the course of a merger or acquisition. This provision includes timeline-specific language, so be clear on the details.

Both businesses in the deal must discuss how—and, just as importantly, when—liabilities will be covered and by which party's insurance company.

Contact your insurance carrier as soon as possible if you're considering a change in control regarding your business. You don't want to find yourself paying for someone else's wrongful acts after the deal is completed.

In broad terms, tail policies—also known as extended reporting periods—cover claims during what would otherwise be a gap in coverage following the sale of a company.

Tail policies help protect officers and directors from claims, such as wrongful acts, even if the acquiring company declines to protect them in the future.

Mergers, acquisitions, and partnerships can be complicated and often require a deep knowledge of business insurance policies and language.

If you're considering such a move with your company, contact us. We can help ensure you're properly covered heading into a transaction. We'll help explain the factors that impact your business coverage so you and your team can concentrate on other aspects of the transaction.

Check out the top risks for horticultural businesses like yours and learn about specific insurance coverages that can help protect you.

You can help prepare your business for the unexpected. Learn why umbrella insurance matters and how it helps pay for claims that exceed your liability limits.

Learn about three types of business insurance coverage that are crucial to protecting your bottom line.