Avoid these pitfalls when buying business insurance
- You may be paying too much, have too little coverage, or lack the coverage you need.
- Know what insurance you need and what limits to set based on your business needs.
- As your business grows and changes, it’s important to review your policies.
Running a business involves many responsibilities, including ensuring you have the right business insurance. Unfortunately, it’s easy to make common mistakes that can cost you big time. This blog post will discuss seven common business insurance mistakes to avoid.
Why you need business insurance
As a business owner, you’ll face many risks, from internal issues like personnel and financial problems to external threats like economic crises and natural disasters. Let’s look at some of the most common types of claims.
- Burglary and theft
- Water damage
- Wind damage
- Customer slip and falls
- Customer injuries
- Product liability
- A third party struck by an object
- Reputational harm
- Vehicle accidents
Many small business owners experience property loss and other damage. You’ll want commercial insurance coverage to protect yourself against common liabilities.
Of course, choosing coverage isn’t always straightforward. It’s easy to make mistakes that can hurt you if you need to make a claim.
Choosing coverage based only on price
Commercial insurance can be expensive, especially if you’re in a high-risk industry. It might be tempting to choose the cheapest policy so you can save money. This could end up hurting you if you experience damage or loss. The old saying, “you get what you pay for,” applies to insurance, too. You might be exchanging price for adequate coverage, which means you might not have enough to cover damages.
Not understanding your coverage
Know the ins and outs of your commercial policy. Otherwise, you might think something is covered when it’s not. Business owners in Florida understand that a hurricane could strike at any time. However, insurance policies don’t usually cover hurricane damage. They also don’t usually cover flood damage caused by natural disasters.
You can add insurance endorsements or amendments to your commercial policy to cover hurricane/flood damage.
Failing to review your policy
You must regularly review your policy if you currently have business insurance. As your business changes, so do your insurance needs.
- Did you…
- Buy new commercial vehicles?
- Buy new computers, technology, or equipment?
- Add a new location?
- Expand your business?
- Upgrade your building, parking lot, or signage?
- Add or upgrade your security system?
- Lease a storage unit?
- Are you close to a flood or hurricane evacuation zone?
All of these things affect your policies. A regular review with your agent is necessary. Let’s talk about seven common business insurance mistakes that small business owners make.
Mistake 1: Not buying enough coverage
One of the most common business insurance mistakes is setting your limits too low. You might think setting lower limits will help you save money, but it can cost you more if you have to file a claim.
Mistake 2: Choosing a low deductible
A lower deductible means you won’t have to pay as much out-of-pocket before your insurance kicks in. While this might seem like a good idea, it generally results in higher monthly premiums. Think about raising your deductible, and you’ll save money every month. You can save that money in case you experience damage or loss.
Mistake 3: Not having enough liability insurance
In today’s litigious society, it’s almost a given that you may be hit with a lawsuit by a customer or client. One lawsuit can lead to thousands of dollars in legal fees, court costs, and judgments against you. Not to mention the damage to your reputation. Specific industries experience more legal action than others, such as healthcare, legal, construction, engineering, manufacturing, restaurants, technology, transportation, or delivery services.
Having enough general and commercial liability is essential, as a single lawsuit can cost anywhere from $3,000 to $150,000. Legal actions can threaten your company’s finances and harm its reputation.
On another note: Some companies require you to show proof of liability insurance coverage before they will hire you for a job. Some landlords also need liability coverage to lease office space.
Mistake 4: Not having enough property insurance
Property insurance is essential whether you own commercial property or lease space. If you are insuring your building, ensure you have enough coverage limits. Even if your policy includes replacement cost coverage, which covers the cost to replace or repair damaged property, the amount won’t exceed your limits.
Review your policy for coinsurance clauses and agreed value provisions. Both mean you could face penalties for underinsuring your property. If you’re underinsured, you could pay the total amount to repair or replace damaged property.
Mistake 5: Not having business interruption coverage
You might consider property and liability insurance the most important types of coverage. However, you still need to consider what will happen if property damage leads to a loss of income. Whether the building is left uninhabitable or inventory gets damaged, you might not be able to operate for some time. Business interruption coverage will reimburse you for lost revenue. It can also ensure you’re still able to pay your employees.
Note: You may be able to save money by getting a Business Owners Policy (BOP). This type of coverage bundles liability, property, and business interruption insurance.
Mistake 6: Neglecting to buy professional liability insurance
Professional liability insurance or errors & omissions (E&O) insurance helps protect your company if you’re found negligent with professional services. It covers legal expenses and any damages awarded to clients or customers. It’s essential for many professions, from accountants, attorneys, and contractors to IT professionals, marketing agencies, and medical/dental practices.
- Inaccurate advice
- Advertising injuries
- Libel and slander
This policy is essential for many businesses. It covers legal expenses and damages awarded to clients.
Mistake 7: Failing to develop a risk management strategy
The best way to save money regarding insurance is by reducing or avoiding making claims. Risk management strategies can help prevent damage, loss, or theft.
Common strategies include:
- Installing a security system with surveillance cameras
- Having clients sign a contract before conducting any business
- Holding training sessions for employees to avoid injuries and accidents
- Ensuring all drivers go through the proper safety training
Protect your business with the right commercial insurance
Avante Insurance offers business insurance policies as well as an array of other commercial insurance for your business, including cyber insurance. We can help you secure the right policies for your needs. Contact us today to request a quote.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.