Advertising is a market that continues to grow worldwide. Changes in technology have forced traditional agencies to evolve, with new companies specializing in digital advertising. It’s a favorable and encouraging scenario for new entrepreneurs.
But where there are opportunities, there are also unknown risks. Although an advertising agency does not offer the same risks as a factory, it’s a market with its own challenges.
Errors (such as incorrectly reported prices), intellectual property infringement, defamation, and a variety of administrative issues can cause irreparable damage to your small agency’s reputation.
These risks come when you least expect, and you need to be prepared for them with proper insurance coverage.
Workers’ Compensation Insurance
At first glance, advertising doesn’t seem like a very dangerous occupation. But if your editor stumbles on the agency’s wet floor and breaks their arm, or if the company’s designer develops an injury from using the computer for a long time, you may be held responsible for medical bills and even face a lawsuit.
To avoid this risk, you need to have workers’ comp insurance, which helps pay medical bills, lost wages, and other costs with work-related accidents. Workers’ compensation is legally required for most businesses, but legislation varies by state. Check your state laws for details.
A Business Owners Policy (BOP)
Whenever a small or mid-sized business has a physical location, assets that could get stolen or damaged, and offers a product or service for which its owner can be sued, a Business Owners Policy (BOP) is mandatory. It’s also an opportunity to save money, as it guarantees three types of coverage:
- Commercial General Liability (CGL) Insurance– If any service you provide or a situation on your company’s premises causes injury or property damage to third parties, you have legal responsibility for it. A CGL insurance policy protects against losses in these cases.
It’s important to note that CGL policies typically cover advertising injuries, they don’t offer this protection for companies in media industries such as advertising, publishing, and broadcasting.
CGL plans for most media-related businesses do not cover personal and advertising damages resulting from situations such as defamation, slander, or third-party copyright infringement. For these cases, you need to provide a separate media liability insurance policy.
- Property Insurance– This part of a BOP covers the buildings belonging to the company and its assets (equipment, inventory, and even furniture), protecting the property against natural disasters and theft.
- Business Interruption Insurance– If the building of your agency is damaged by fire or impacted by another covered catastrophe that requires an immediate interruption of operations. This insurance helps to make up for the loss of revenue until it is possible to resume work. Some policies also cover extra expenses for a temporary location.
BOPs do not include commercial auto, professional liability, or product liability insurance. Don’t forget to provide separate policies for these areas if applicable to your business.
Media Liability Insurance
Media and content producers have different responsibilities and face different risks than other types of businesses. Media liability insurance—a specialized form of errors and omission insurance—is designed for sectors that work with creating and producing articles, audiovisuals, and photographs, like your advertising agency.
If your company is sued for using music in a commercial or a photograph in an ad, this is the insurance you need to have. In general, it covers the following issues:
- Copyright infringement
- Defamation (slander and libel)
- Plagiarism
- Invasion of privacy
However, it’s important to note that media liability insurance does not typically cover false advertising claims.
Cyber Liability Insurance
Hacker attacks are more common than you think, and the damage they do to the company’s finances and image can be devastating. For example, a famous hotel chain was sued for $25 million in October 2020 after a security breach caused data leaks from millions of guests.
Advertising agencies work daily with computers and the internet. Your losses from data leaks can be irreparable, especially when confidential third-party info is breached.
Cyber liability insurance helps cover costs with loss or damage to electronic data, losses or extra expenses to deal with computer system failures, cyber extortion by hackers, and even damage to your company’s reputation in the case of a data breach.
Being Insured is the Best Advertising
Advertising is a challenging activity, and not just creatively. It involves less physical effort than other businesses, and you probably won’t have to worry about employees carrying weight or dealing with dangerous substances.
On the other hand, you may face very particular risks, such as copyright infringement and data leakage lawsuits. Being prepared with the necessary insurance coverage is the best solution. Large companies want to work with agencies that convey an image of safety and responsibility. In this sense, having proper insurance is the best advertising for your business.
