Contributor, Benzinga
October 26, 2022

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Investment companies and businesses that deal with securities face unique risks related to customer data. An investment insurance policy compensates you in the event that a customer accuses you of conducting your business in a fraudulent manner or your data is compromised. Read on to learn everything you need to know about investment insurance before you purchase a policy. 

What is Investment Insurance?

Investment insurance is a term applied to a series of insurance policies that business owners who deal in securities benefit from. The specific protections included under an investment insurance policy varies between providers, but most include coverage for general business liabilities and property damage. An investment insurance policy will also include coverage that protects you in the event that a customer sues you for negligence or fraud. 

Maintaining investment insurance is essential for business owners who work with financial products, securities or who invest on behalf of clients. Some examples of businesses that should maintain investment insurance include: 

  • Personal financial management companies
  • Venture capital firms
  • Investment advisers 
  • Managers who work in finance 

Investment insurance can save you from a potentially costly lawsuit — so it’s a good idea to begin comparing coverage as soon as possible if you handle money as part of your business operations. 

What Does Investment Insurance Cover?

The specifics of what is included under each investment insurance policy vary by company. Some of the most common protections include:

General liability insurance: General liability insurance protects your business in the event that a client sues you for an injury or accident that occurred on your property. For example, if a stoop on your business’s entrance is uneven and a customer hurts themselves falling from it, they could sue your business for the cost of their medical bills. Commercial liability insurance would help you cover the cost of your legal defense as well as any judgments a court orders you to pay. 

General liability insurance will also help cover your expenses if you are sued by a competing business owner for fraud, copyright infringement or slander. This type of insurance will not cover any costs associated with lawsuits you bring against competitors. 

Property damage liability insurance: Property damage liability insurance compensates you for legal expenses if a client sues you for property damage. For example, if a client hands you a laptop and you break it, the client may sue you for the cost of a replacement. In this example, your property damage liability coverage would help cover your legal defense costs as well as any expenses you are ordered to pay. 

Business income insurance: Business income insurance is a type of insurance coverage that helps you recover some of the income you’d normally be earning in the event that you’re forced to temporarily shut down your business. For example, if a covered incident of property damage forces your business to close, your business income insurance can help you cover recurring expenses like payroll. This insurance may also help you cover the cost of a secondary location if your primary commercial space is undergoing repairs following property damage. 

Be sure to consult with your insurance agent to discuss the policy inclusions and coverage limits on your investment insurance policy to be sure you’ve got a level of coverage that works for your business. 

Other Types of Investment Insurance

If you own or operate a financial company, you may want to protect your business with additional investment insurance. The following types of coverage are common choices for companies that work in investing and securities. 

Professional liability insurance: Professional liability insurance helps you pay for the cost of legal expenses if a client sues you for negligence. This coverage is different from general liability insurance, which will only help you cover your expenses for lawsuits related to medical expenses and injuries on your property. This coverage is sometimes referred to as errors and omissions insurance and is an essential type of investment broker insurance if you make investments on behalf of clients.

Key person insurance: Key person insurance is a life insurance policy a business can purchase for its top executives. The purpose of key person insurance is to compensate the company in the event that an executive who is crucial to the operations of the organization dies or is permanently disabled. This insurance can help pay for the cost of training a replacement or covering payroll while the company searches for a way to fill the role of the key person.

Policies with up to $1 million in coverage are available from most major insurance companies offering commercial insurance options. With this type of life insurance coverage, the business is responsible for paying the premiums and is listed as the policy’s beneficiary.

Worker’s compensation insurance: Worker’s compensation insurance helps your employees cover the cost of medical expenses if they are injured on the job. Depending on the state you live in, you might need to purchase worker’s compensation insurance as soon as you hire your first employee. Worker’s compensation requirements vary by state and the size of your business.

Commercial umbrella insurance: Commercial umbrella insurance is an extension you can purchase to extend your other business insurance coverages. For example, you can purchase a commercial umbrella insurance policy to increase liability limits on your professional liability insurance, covering you under higher-value cases.

Commercial auto insurance: If your business has multiple locations or provides services for clients outside of your commercial space, your employees might not be covered when driving using personal auto insurance policies. Commercial auto insurance policies provide the same coverages as personal auto insurance policies but protect your employees when driving between work locations.

Cyber liability insurance: Cyber liability insurance protects your business against cyberattacks, hacking and the loss or compromise of client data. It can help you cover legal expenses if a client sues you following a cyberattack, lost expenses resulting from a network outage and regulatory fines from local governments. 

Compare Investment Insurance Providers

Protecting your business with investment manager insurance is crucial if you work in the financial sphere. Benzinga offers insights and reviews on the following investment insurance providers. If you’re feeling overwhelmed by the number of options you have, consider continuing your search for the best insurance using a few of the links below. 

Frequently Asked Questions

Can I get insurance on an investment?

You cannot buy insurance on individual investments to prevent loss if the investment decreases in value. However, if you invest through a broker that is insured by the Securities Investor Protection Corp. (SIPC), your investments are covered if the broker goes financially bankrupt.

How much are investments insured for?

The SIPC insures investment accounts up to $500,000 in the event that a brokerage goes bankrupt. Customers who held an account at the brokerage can recover up to $250,000 in cash held in their brokerage account and up to $250,000 worth of shares held in their account. 

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.