Do Insurance Companies Need Business Insurance?

Here's a question worth considering: Who insures your insurer? Insurance companies will typically carry business insurance on two fronts:

  • Most insurance companies will carry a business insurance policy. Just like any business, it has risks that it needs to take care of. When it comes to insuring its building against damages and break-ins, a standard business policy does the trick. Likewise, it needs to consider workers compensation and all the other risks associated with running any normal business. An insurance company is a business, so it needs business insurance to protect its interests. And in case you're wondering: Yes, it's possible to insure yourself if you run a business insurance company — depending on any regulations and laws that may apply. It's not really a conflict of interest because it's unlikely someone would want to commit fraud just to collect their own money.
  • Many insurers carry reinsurance. Reinsurance is essentially an insurance policy on insurance policies. An insurance company is expected to be able to cover its policies. But, when disaster strikes, it is not uncommon for an insurance company to wind up with hundreds — or even thousands — of claims which it simply cannot cover without going bankrupt. Reinsurance helps them to cover this risk.

Reinsurance helps to cover your insurer, but it also helps to cover you. If your insurance company simply does not have the funds to cover every single claim after a fire tears through a neighborhood, for instance, then you're not going to get your claim paid, unless your insurer has a reinsurance policy with another company. Reinsurance can be a life-saver for small and medium-sized insurance companies and their customers.

It can generally be assumed that everything is insurable, including insurance. So long as it's legal, and solong as it is something that you can document, you can probably take out an insurance policy on it.