The hurdles for businesses that want to go global have diminished in recent years. Social media has simplified international marketing, and digital commerce goes unhindered across national boundaries. If your organization has gone global - or is thinking of doing so - it’s likely that you have considered purchasing international business insurance.
Many firms within the indemnity protection industry will claim that you can never have too much insurance. If you’re paying for something you couldn't possibly need, though, this sage advice is simply untrue. Before you decide to invest in international insurance for your company, there are some very important facts you should know.
What is International Business Insurance?
Regardless of the industry, you’re in or the size of your business, it’s likely that you have some level of insurance protection. General liability insurance is the most common policy. Once you get into the global trade field, though, this basic coverage isn’t enough to safeguard your company. That's where international insurance for businesses becomes essential.
International business insurance covers risks associated with commerce that takes place across international borders. Whether products travel five minutes from Texas to Mexico or require a 15-hour flight to Australia, businesses incur several liabilities when they step outside of their own country. Having an insurance policy with international protection is vital in these instances.
International business insurance can help in a variety of ways:
- Coordination of specific coverages based on nations of trade.
- Monitoring specific jurisdictional policies that differ from the country of origin.
- Creates global and master policies based on the laws of other jurisdictions.
- Provides protection against potential foreign litigation.
- Policy coverage customized to specific industries and where they do business.
- Offers technological tools that transform Multinational Risk Management.
These are just a few of the ways international business insurance can help organizations who go global. Since 58 percent of American companies already have global customers, the need for these types of policies is on the rise. Simply because a person or firm is out of the country does not mean a company is immune from potential litigation.
These concerns are especially prevalent among businesses that import and export products and materials. Of course, any company that engages in commerce across borders should seriously consider international business insurance. Not every organization will need such a policy, but understanding potential risks is an essential aspect of making this decision.
What Potential Problems Could Arise?
When business owners think of professional liability, they typically envision faulty products that cause consumer harm. While this is certainly one area of risk, it’s far from the only liabilities a company could face. If you overlook even one potential hazard that could cost your organization money, Murphy’s Law dictates that that’s the exact problem you’ll encounter.
Consider some of these issues - which are often overlooked as potential contingencies - that can result in a monetary loss for a firm:
- Foreign buyer nonpayment.
- Post-sale liabilities and contingencies.
- Employees traveling overseas.
- Trade embargoes and wars.
- Interruptions in supply chains.
- Delayed permits in foreign countries.
These are some of the biggest reasons a firm may need international business insurance. Unfortunately, they’re far from the only potentialities. Cultural, political, and regulatory differences between countries can create significant issues for businesses. This is why many companies find it difficult to see a return on investment in global trade.
With the right insurance policies, though, you can protect your business from many of these problems. The benefit of such coverage is undeniable, but this doesn’t mean everyone should buy a policy. It’s important to consider your organization’s specific needs before making the investment.
Do I Need International Business Insurance
Global trade has exceeded global output in recent years. This stems from new companies reaching across borders and established organizations increasing their foreign footprint. Even small business owners and individual sellers on e-commerce sites have taken to shipping overseas. This will not always equate, however, to them needing international business insurance.
There is one major question professionals should ask themselves to figure out whether they should have international insurance for their organization:
“Does my company already have business insurance covering our domestic operations?”
If the answer is “yes,” there’s a good chance you could benefit from policies that cover organizations on foreign soil. If you need general liability coverage, professional liability insurance, product recall coverage, and cyber insurance in America, you’ll likely face the same risks overseas. In fact, there are many additional legal perils you could encounter.
International business insurance policies covering cargo, marine travel, compensation for overseas workers, export credits, and even employed kidnapping victims are all quite common. Some companies obviously won’t need these due to how they operate. After all, who needs marine insurance if their products are shipping via plane?
These examples do show, however, the extent of risk that many organizations encounter when doing business on foreign soil. It’s still possible that your company may not need international insurance for global commerce. Needing such a policy and not having it, though, can turn into a very costly endeavor.
Make the Right Call on International Business Insurance
Even when you understand the basics of international insurance for businesses, deciding whether your organization needs a policy can still be difficult. And even if you conclude that purchasing such coverage is the way to go, many people have problems choosing an appropriate level of protection. This should never serve as an excuse, though, for putting off a policy purchase.
At Varas Insurance Brokerage, we know how complex figuring out your international business insurance needs can be. Contact us today and we’ll help you figure out how to protect your organization.