Insurance is an essential aspect of everyone’s life. It helps protect you against unprecedented events that can potentially ruin your finances, such as accidents, sudden illnesses, and natural disasters. For business owners, insurance helps cover the costs of property damage and personal injury claims, among other untoward incidences, and protects the business from potential legal problems.
Knowing what business insurance mistakes to avoid is like knowing what to look for in a home inspection. Similar to finding potential money pits in a home, being well-versed in insurance mistakes helps protect you against devastating financial losses in case something happens.
That said, here are the most common insurance mistakes that all business owners should avoid at all costs:
1. Buying the cheapest policies
As a small business owner, keeping your expenses lean is one of the best ways to optimize cash flow. But should this come at the cost of your coverage? Definitely not.
Choosing the cheapest insurance policies available might not always be best for your business. The reason for this is that cheap insurance policies generally provide bare minimum coverage, which might not be enough to cover your expenses when you eventually need to file a claim.
2. Not reading the policy
It is common sense to read the policy of an insurance company, and yet so many business owners tend to gloss over the entire thing without a second glance. If you do this when buying insurance for your business, you can miss out on critical information that might be relevant to the claim/s you will file in the future. The result? More headaches and possibly a rejected claim.
3. Failure to ask questions
If there are parts of the policy that are unclear to you, don’t hesitate to ask the insurance provider before you sign on any dotted line. Otherwise, you might misunderstand some parts of the policy, which can lead to even more confusion when it’s time to file a claim.
4. Thinking that a lawsuit won’t happen to you
You have the best staff in your employ, your property is as safe as it can be, and you are compliant with all the local laws and regulations. Does that mean that the possibility of a lawsuit is slim? Unfortunately, accidents and untoward incidents can still happen, no matter how much preparation you do.
No business owner wants to be sued. However, you must be prepared in case it happens, and getting good liability coverage is the best way to do that.
5. Failing to consider income losses
If your business is unable to operate due to unforeseen circumstances (e.g. fire, flood, earthquake damage), income loss coverage helps keep you afloat while you try to piece everything back together. If you don’t have this type of coverage, it can be ten times harder or even impossible to get the business up and running again.
6. Keeping the same policy despite unfavorable changes
It is not recommended to keep the same policy if either your business or your insurance provider has undergone some significant changes. Over the years, many insurers impose changes that affect your insurance coverage. If the changes are not in line with your needs or preferences, it might be time to change policies or insurers.
On the other hand, if your business has grown since when you first got your policy, it might be time to adjust your insurance. However, if the insurer is unable to meet the needs of your business, you should find another insurance provider that can.
7. Assuming coverage
Say, a business owner sees that they are covered for natural disasters and from there, assumes that they are covered for every type of natural disaster. But when a tornado comes and causes damage to the business, the business owner might ; be surprised that they are not covered for tornados, and it says so on the fine print.
This is why reading the policy in its entirety is so important. If you’re not sure if you’re covered for a certain type of event, ask the insurer to make sure. At the same time, you should also know the limits of the coverage. Never assume how much the insurer is going to cover based on what you’ve skimmed through in the policy.
Making one or a few of these insurance mistakes can be deadly for your business. Just one accident or natural disaster and you could be left reeling from a devastating financial loss. So if you want your business to be prepared for anything, do everything you can to avoid these common insurance mistakes.
What other insurance mistakes can you think of? Share it with your fellow business owners in the comments below.