Fundamentals of Risk Management

Insurance and risk transfer 
201
Feature of the business insurance requirement
1
Business has employees
Employers’ liability
2
Employees travel outside the country
Business travel
3
Members of the public could be affected
Public liability
4
Business supplies products or components
Product liability/recall
5
Business provides professional advice
Professional indemnity
6
Theft or dishonesty by employees could occur
Fidelity guarantee
7
Business occupies business premises
Premises insurance
8
Premises has machinery or other stock
Contents cover
9
Business depends on machinery or computers
Engineering insurance
10
Business could be disrupted by fire, flood etc
Business interruption
11
Business is involved in transporting goods
Goods in transit
12
Business has motor vehicles on public roads
Motor
13
Business provides life benefits to employees
Life and health
14
Certain staff are key to operation of business
Key person
15
Business would suffer in event of a bad debt
Trade credit
16
Business has directors and/or officers (D&O)
D&O liability
TAbLE 
17.2
Identifying the necessary insurance
The cost of insurance is defined by the insurance premium that is required from the 
organization. A second component of the cost is the level of self-insurance (including 
excess or deductible) that is imposed by the policy. This means that if a claim occurs, 
the organization will have to pay the first part of the claim before receiving any 
money from the insurance company.
Insurance policies usually have limitations, warranties and exclusions. These will 
state that claims will be refused in certain circumstances. These coverage issues need 
to be explored in detail by the organization purchasing the insurance to ensure that 
adequate coverage is available. The only reason for buying insurance is that claims 

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