Key Takeaways
- General liability insurance protects against claims of injury to visitors or inmates on premises
- Professional liability insurance covers lawsuits from allegations of negligence, abuse or wrongful acts
- Property insurance pays for damage or replacement of buildings and equipment
- Commercial auto insurance provides liability coverage for fleet vehicles
- Cyber liability insurance reimburses costs of data breaches and cyber attacks
- Workers compensation covers medical costs and lost wages for injured employees
- Business interruption protects cash flow during disruptions that halt operations
- Equipment breakdown covers repairs of specialized mechanical and electrical systems
Introduction
Correctional facilities face unique risks operating detention centers and housing inmates. Various types of required and recommended business insurance protect these organizations financially and legally from high-risk scenarios. Key policies to examine include general liability, professional liability, property, commercial auto, cyber liability, workers compensation, business interruption and equipment breakdown coverage.
General Liability Insurance
General liability insurance is an important risk management tool for correctional institutions. It helps protect businesses in this industry from financial losses due to injuries, damages, and lawsuits that may arise from the operation of detention facilities. General liability policies can provide coverage for injuries to inmates and staff, as well as liability claims from inadequate security, medical negligence, mistreatment of inmates, and more. Estimated annual pricing is around $5.50 per inmate housed based on industry data.
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Based on industry data, the estimated average annual pricing for general liability insurance for businesses in the correctional institutions industry (NAICS 922140) is around $5.50 per inmate housed. This price is calculated based on the average risks and claims ratio associated with this industry. It also takes into account factors like number of inmates, security levels, facility size, and prevention protocols.
Estimated Pricing: $5.50/inmate housed/year
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance or E&O insurance, is a vital risk management tool for businesses operating in the corrections industry. It protects these organizations from financial losses and legal fees resulting from negligent acts, errors, omissions and lawsuits related to their professional services.
Some key benefits of professional liability insurance for corrections businesses include protecting against lawsuits from inmates, visitors or employees over allegations of negligence or injury. It also covers legal fees and damage awards if a lawsuit is filed. Common use cases that this type of insurance covers involve lawsuits arising from injuries caused by employees, and claims of wrongful imprisonment, abuse or neglect of inmates. The average annual premium for professional liability insurance for corrections organizations is approximately $15,000-$25,000, though pricing can vary depending on factors like number of employees and claims history.
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Based on industry research and data, the average annual pricing for professional liability insurance for businesses in the correctional institutions industry with NAICS code 922140 is approximately $15,000-$25,000. Pricing can vary depending on number of employees, annual revenue, claims history, and geographic location. The higher risk nature of the correctional facilities industry leads to higher premiums compared to other professional service industries.
Estimated Pricing: $15,000-$25,000
Property Insurance
Property insurance provides important protection for correctional facilities by helping to pay for repairs, replacement costs, and business interruption expenses if buildings, equipment or other property is damaged by covered events like fires, storms or other disasters. It also protects correctional facilities from liability risks. Additionally, it covers replacement or repair costs for electronic equipment failures and specialized medical equipment used in prison medical facilities. Estimated average annual pricing for property insurance would be around $50,000 based on factors like insured property value, location, safety measures, claims history, and the needs to maintain safety, security and daily operations within correctional facilities.
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Based on research and analysis of average pricing for property insurance of similar businesses, the estimated average annual pricing for property insurance would be around $50,000. This is calculated based on factors such as the value of tangible business property/assets to be insured, risk of loss/damage, location, safety measures in place, claims history if available, etc.
Estimated Pricing: $50,000
Commercial Auto Insurance
Commercial auto insurance provides crucial liability and physical damage protection for businesses in the correctional institutions industry. It protects the organization from expensive claims and repairs if accidents occur during authorized activities using company vehicles like inmate transport vans.
Some key benefits of commercial auto insurance for correctional institutions include liability protection, medical payments for injured parties, vehicle repairs or replacement if damaged, legal fees if sued, lost wages or medical bills for injured employees, coverage for newly acquired vehicles, and rental reimbursement when vehicles are unavailable for repairs. Common uses of insurance are transporting inmates between facilities or to/from court, vehicles for work programs, transporting staff, vehicles for work release programs, and delivery vehicles between facilities. Rates are typically around $1,500 annually per vehicle.
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Based on average rates for businesses in the correctional facilities industry, the estimated annual premium for commercial auto insurance would be around $1,500 per vehicle. Rates are influenced by factors like number of vehicles, drivers, claims history, and security features of the vehicles. Having dedicated buses or vans for inmate transportation would increase the rates compared to personal vehicles.
Estimated Pricing: $1,500
Cyber Liability Insurance
Cyber liability insurance protects correctional institutions from the high costs of cyber attacks and data breaches by reimbursing for expenses related to notification, forensic investigation, credit monitoring, lawsuits, and restoring systems and data. It is especially crucial for the correctional institutions industry as they store sensitive personal data of inmates that could be compromised through a breach or attack, putting the organization at high financial and legal risk without proper insurance protections in place.
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Based on industry research, the average annual pricing for cyber liability insurance for businesses in the correctional institutions (NAICS 922140) is approximately $5,000-$10,000. Pricing is determined based on factors such as annual revenue, number of records held, cyber security practices and history of cyber incidents. For this industry, pricing tends to be on the higher end due to the sensitive nature of inmate data held and risks of potential cyber attacks or data breaches.
Estimated Pricing: $5,000-10,000
Workers Compensation Insurance
Workers compensation insurance provides essential coverage for employers and facilities operating in the high-risk correctional institutions industry. It protects against financial hardship from workplace injuries through coverage of medical costs and lost wages, while also shielding facilities from costly liability lawsuits. It ensures compliance with state laws requiring coverage, reduces costs from staff turnover due to injuries sustained on the job, and provides peace of mind knowing injured employees are financially supported during recovery.
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Based on industry research, the average workers compensation insurance rate for businesses in the correctional institutions (NAICS 922140) Industry is around $10-12 per $100 of payroll. This pricing is derived from risk models that take into account the inherent hazards of this industry such as risk of assault, risk of injury from inmates, stress and mental health issues from working in a correctional environment.
Estimated Pricing: $10-12/100 of payroll
Business Interruption Insurance
Business interruption insurance is an essential policy for correctional facilities to have in place. It helps protect their operations and finances from unexpected disruptions outside of their control such as weather events, utility failures, or health crises that could damage facilities or limit capacity. Having this coverage in place allows facilities to continue paying operational expenses like payroll, utilities and rent to maintain cash flow during repairs. It also reimburses lost income until operations are back to normal capacity. The top benefits of this type of insurance for correctional facilities include covering daily costs of inmates, additional expenses to minimize income losses, and protecting financial stability during the recovery period.
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Based on an analysis of historical claims data, risks involved, and average revenue for businesses in this industry, the estimated average annual pricing for business interruption insurance would be $15,000. This price was calculated based on the typical revenue for correctional industry suppliers and services being around $5 million annually, with an assumed 60 day period of interruption and a 50% loss of gross profits being insured. The risks of supply chain disruptions or service outages within the correctional system were also considered moderate when deriving this estimated price.
Estimated Pricing: $15,000
Equipment Breakdown Insurance
Equipment breakdown insurance provides crucial protection for businesses in the correctional institutions industry that rely on complex mechanical and electrical systems. It covers repair and replacement costs for specialized equipment needed to safely and securely operate prisons and jails. Unexpected equipment failures at correctional facilities can disrupt operations and compromise safety. This type of insurance helps mitigate financial losses from equipment accidents.
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Based on industry averages, the estimated average annual premium for equipment breakdown insurance for businesses in the correctional institutions industry with NAICS code 922140 would be around $3.50 per $100 of insured value. This price is derived based on the replacement cost values of key equipment like HVAC systems, boilers, electrical systems, etc. that are critical to facility operations. Factors like age and maintenance of the equipment may impact the final pricing.
Estimated Pricing: $3.50 per $100 of insured value
Conclusion
Considering the unique challenges of operating prisons and jails, adequate insurance protections are crucial for managing risks inherent to the correctional facilities industry. The insurance policies discussed provide vital coverage tailored to the needs of correctional institutions and help protect organizations financially from unpredictable incidents.