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US Expansion: Corporate Insurance Coverages

To do business in The United States your US subsidiary Corporation will be required to have certain insurance coverages and want to have additional insurance coverages. Below are the six most common corporate insurance coverages in the US.

General Liability

At a minimum, your US subsidiary corporation will be required to have General Liability Insurance typically includes Property Coverage that protects property your corporation owns, leases or rents and Business Liability Coverage that protects and defends your corporation from covered claims alleging that you damaged someone’s property, injured them or defamed them. Often, customers or vendors will specify the "limits of liability" they require your company to carry before they conduct business with you. There are three parts to the limits of liability; Each Occurrence Limit (all claims related to a single incident), General Aggregate Limit (total amount for all losses that occur during your policy term), and Products / Completed Operations Aggregate (total amount for all losses that occur during your policy term as a result of work you completed or for a product you distributed or sold). There are several factors that determine the costs of General Liability Insurance premiums, including the type of business, payroll size, revenue, and the size and type of buildings you own or lease.

Worker’s Compensation

If your US corporation has employees, it will be required to carry Worker’s compensation Insurance in almost every state. Worker’s compensation covers lost wages, disability benefits, ongoing care, and death benefits when an employee is injured while at work. Worker’s Compensation benefits are paid if the injured employee was at fault for the injuries, or not. By agreeing to receive worker's compensation, workers give up their right to sue their employer for their injuries. Worker’s Compensation premiums are calculated as a percentage of $100 of payroll wages and are based on class codes of each employee. Class codes reflect the risks of injury associated with different job types. The Worker’s Compensation costs associated with a roof installer will be much higher than that of an office worker. Worker’s compensation rates and laws vary from state to state. Your US corporation will need to have Worker’s Compensation Insurance in each state where you have employees. Worker’s Compensation Insurance does not cover Independent Contractors or 1099 employees. Your US corporation should require “proof of insurance” coverage from any contractors before allowing them to perform any work.

Errors and Omissions

Errors and Omissions Insurance, commonly referred to as E&O Insurance, protects corporations against claims of mistakes, negligence, work errors, failures, or misrepresentations. E&O insurance covers legal and court costs, settlements or judgements, damages, and expenses. Historically, Errors and Omissions Insurance was used mainly by professional services firms (consultants, financial advisors, etc.), but if your US corporation is in the technology industry or rely on technology to deliver your products or services you will almost certainly want to have E&O insurance coverage. There are several factors that determine the costs of Errors & Omissions Insurance premiums, including the type of industry, claims history, amount of coverage and the number of employees.

Cyber and Privacy

Cyber and Privacy Insurance was historically used to cover a Corporation's liabilities for data breaches involving sensitive customer data such as Social Security numbers, credit card numbers, health records, or other personal identifiable information. Today, ransomware coverage is the most important coverage component of Cyber and Privacy Insurance. It's also the most difficult and costly insurance to obtain. Cyber and Privacy Insurance covers Corporations against losses stemming from data breaches and ransomware attacks including: business interruption, notification costs, credit monitoring, claims by regulators, fines, penalties, and customer identity theft. The growing prevalence of data breaches and ransomware attacks by individuals, criminals, and even government backed hacker groups has driven the costs of premiums Corporations must pay for coverage up dramatically. There are several factors that determine the costs of Cyber and Privacy Insurance policy premiums including: industry, computer and network security, multi-factor authentication policies and procedures, the type of data stored, adn the Corporation's gross revenues.

Directors and Officers

Directors and Officers Liability Insurance, commonly referred to as D&O Insurance, protects Directors and Officers of your US Corporation from personal liability and legal fees should they be sued individually. D&O Insurance typically covers misuse of corporate funds, misrepresentation of financial reporting, breach of fiduciary duty, corporate governance, wrongful acts, or violation of workplace laws. Fraud and criminal acts are typically not covered. There are several factors that determine the costs of Directors and Officers Insurance policy premiums including: the length of time in business, financial health, company size, claims history, and key terms.

Employment Practices Liability Insurance

Employment Practices Liability Insurance, commonly referred to as EPLI, protects Corporations against losses incurred related to various employment related claims including sexual harassment, discrimination, wrongful termination, wrongful termination, breach of contract, and retaliation. EPLI typically doesn’t cover punitive damages, or civil or criminal fines. There are several factors that determine the costs of EPLI including the size of the Corporation, the industry, and other risk factors.

If you have questions about corporate insurance or opening a foreign subsidiary corporation in the United States feel free to contact us. We will be happy to answer your questions.

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