Advertising Agency Insurance

Advertising agency insurance could protect your firm against a multitude of risks. Here’s how.

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Understanding Advertising Agency Insurance

Advertising agencies deal directly with the way their clients’ business reputation is to be perceived. This is achieved by using imagery, primarily a subliminal process. The power of suggestion works its way through the mind. Together, these creative elements produce the desired results in the growing world of image-conscious businesses.

The size of the global advertising industry was $590.3 billion in 2021 and is expected to grow to $792.7 billion by 2027. (Source) The US advertising market alone has hit around $320 billion in 2022 (Source). The risks and liabilities of the advertising industry have grown in tandem with its size.

However, creative work is highly subjective and prone to human error. Since ad firms are responsible for developing the communication between a business and its audience, they must be extremely meticulous with their approach.

An oversight would impact the customer’s perception of the client’s brand and tarnish the client’s image before their audience, ultimately affecting the ad agency’s reputation and revenue. Here, insurance steps in to protect the ad agency from professional errors and omissions that they can be exposed to in the normal course of operations.

Business and professional risks

If your efforts don’t elicit the desired results or your firm makes a mistake, your client could sue you. It could result in financial damages. It’s a fact that some clients are difficult to please, but negligent oversights and errors or omissions occur as well, despite the best intentions.

The reach of insurance for ad agencies is quite extensive. It can secure your business against many potential risks and unexpected events that would otherwise negatively affect an advertising firm’s business.

Let’s look at some examples that an advertising agency would get coverage for under the proper insurance.

Advertising Agency Insurance

Professional exposures

If an advertising firm fails to include a word in the ad campaign and completely changes the ad campaign's meaning, it could cause a reduction in sales for the client company, which may sue the firm for its error.

Advertising campaigns could also backfire due to a slogan or logo being similar to that of another business. That business may then claim plagiarism or copyright infringement. The nature of marketing and advertising exposes an advertising firm to errors, omissions, or unintended results. Professional liability insurance protects an ad agency against negligence and professional misconduct claims, provides defense expenses, and pays for compensatory damage for covered claims.

Some of the professional exposures you may deal with are listed below:

  • Scenario 1 - Your client’s competitor accuses your client of slander or libel based on an advertisement created by your firm.
  • Scenario 2 - A client’s campaign doesn’t go as expected. They sue your firm for negligent failure to deliver as agreed or errors or omissions leading to financial loss.
  • Scenario 3 - A word is omitted from an advertisement, and the client sues you for professional negligence.
  • Scenario 4 - Your employee forgets to obtain the reproduction rights of a video clip; consequently, your client gets sued for copyright infringement.
  • Scenario 5 - The use of a word in an advertisement created by your firm becomes the cause of a sudden drop in your client’s sales, and your firm is accused of errors or omissions.

Property coverage

Advertising agencies that operate from within physical premises are exposed to incidents of a magnitude that could affect the normal functioning of the business. Coverage for your building, furniture, fixtures, equipment, and business income is included in a property policy. Threats to your owned property include fires, theft, windstorm, riot, vandalism, or other covered risks that result in loss or damage to your business-owned property.

Cyberattacks

Ad agencies collect a lot of sensitive information about their employees and clients. During a cyberattack, the employees' addresses, bank details, and social security numbers could be exposed. Your client may have shared proprietary information with your firm about their business which is not to be disclosed to the general public.

A data breach or system hacking could compromise the personal and financial information of your client, your employees, and even your business. If properly endorsed, a policy tailored to reimburse for cyberattacks can respond to claims of financial losses suffered by your client, crisis management, identity theft, credit monitoring expenses, and system damage and lost income from business disruption for your business as well.

Vehicular accidents

Suppose an ad agency’s employees use the company vehicle to commute between client meetings or fulfill other work commitments. In that case, the employees are at risk of an at-fault accident that damages the company vehicle, as well as causing property damage to another vehicle or even bodily injury to another driver for which your business is legally liable.

Deciding on the right plans for insuring your advertising firm depends on the size of your business, annual payroll, location, the sizes and number of locations, and values insured you have. Limits of liability chosen on general liability or auto liability also affect the cost. What your policies will cost will be a function of this mix of factors.

Recommended Policies

Your advertising agency follows risk management procedures to keep your exposures at a minimum. And yet, no workplace can be incident-free. As an advertising firm owner, you should consider insurance to assess and secure against the risks unique to your business.

Professional liability insurance

Sometimes the smallest of mistakes by your advertising firm could expose your client to large financial losses or a dip in sales. The client could sue you to recover the losses. In such a case, your professional liability coverage will kick in while you focus on running your business. Some of the risks covered by professional liability are:

  1. Professional negligence
  2. Errors and Omissions (E&O)
  3. Service not delivered as promised
  4. Copyright infringement

 

General liability insurance

You will get third-party property damage, bodily injury, personal injury, product liability, and advertisement injury. It allows small businesses to work uninterruptedly.

Workers’ compensation insurance

It takes care of employees’ medical expenses and a percentage of lost income if they suffer an injury or illness at work (make sure you factor in how many remote employees you have as well). Workers’ compensation also provides financial benefits for an employee’s dependents in the case of a work-related employee death.

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Property insurance

Property Insurance, which is included in a BOP, provides coverage on your building and business contents, business interruption insurance, and extra-expense coverage. The extra-expense coverage pays for a company's extraordinary expenses after an insured event.

Commercial auto insurance

Your employees will be using company vehicles for client visits. Hence, you need to get commercial auto insurance to insure in the case of certain scenarios.

Cyber insurance

Your cyber insurance will protect you from cyber-attacks, online breaches, system hacking, and ransomware demands. The expenses that are covered by the policy are to deploy relevant IT resources to check the issues, restore firewalls, software and malware checks, legal fees to defend the lawsuits filed, and regulatory fines to protect data.

Comprehensive costs covering advertising agencies

The comprehensive costs for advertising agency insurance policies vary based on several factors like:

A successful advertising agency requires a smooth operating flow and continuous service. The right insurance ensures that the advertising firm maintains its reputation while proactively providing the most creative services with optimum results.

To get an insurance program tailored to suit your needs, speak to Insurance Advisor’s licensed agents today.

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