It's all in your head; Insurance: Cover what you can't touch

Entrepreneur, Nov, 2001 by Jacquelyn Lynn

CONVENTIONAL BUSINESS WISDOM says you must protect your assets with insurance. But what about intangible assets such as information? They can't be burned down, but they're still vulnerable to theft or misuse. If you have patents, trade secrets, copyrights, trademarks or other intellectual property (IP), you can get IP insurance to cover the cost of protecting them.

Litigation costs for an infringement suit can range from several hundred thousand dollars to well over $1 million. "You need the means to be in court and stay there," says Robert W Fletcher, president of Intellectual Property Insurance Services Corp. in Louisville, Kentucky. With insurance to provide litigation funds as needed, you'll prevent an unexpected cash drain and be able to demonstrate to competitors, investors, employees and the general public that you will vigorously enforce your IP rights.

There are several IP-related insurance products to consider, Fletcher says. Infringement abatement insurance reimburses litigation expenses when someone infringes on your rights and pays legal costs when your claims to IP rights are challenged. Loss of value coverage pays your losses should you lose a case against an alleged wrongdoer. Infringement defense cost reimbursement coverage pays your legal expenses if you are sued for infringement, and may pay damage awards if you lose. Of course, all payments are based on policy limits, so be sure you carefully read and understand what the policy covers.

Costs of coverage vary depending on the type of property insured and other factors. Minimum annual premiums range from $1,300 for $100,000 up to $9,871 for $1 million in coverage.

JACQUELYN LYNN is a freelance business writer in Orlando, Florida.