For small business owners, insurance can provide a necessary safety net—a way to mitigate risk and to safeguard against the unexpected. With that said, choosing the wrong insurance can have damaging consequences. You could simply end up paying too much for insurance you don’t really need—or worse, you could be leaving yourself exposed to major liability issues and not even realize it.
To avoid such damaging results, steer clear of these common insurance buying pitfalls.
THE MOST COMMON BUSINESS INSURANCE MISTAKES
AUTOMATICALLY CHOOSING THE CHEAPEST POLICY
It’s only natural that you’d want to buy the policy with the lowest monthly premiums—but be sure you consider what kind of value you’re getting. Cheap insurance policies may come with sky-high deductibles and very limited coverage, where paying just a little bit more gets you superior protection.
RISKING LOW LIMITS
The simple truth is that any business can be hit with a lawsuit at any time; it can feel completely out of the blue. It’s one of those things that you never think could happen to you, until it does. When purchasing general liability insurance, you don’t want to risk low limits, which won’t offer much protection in the event of a lawsuit. Talk to a lawyer about the limits that are appropriate for your business.
ASSUMING YOUR PERSONAL COVERAGE IS SUFFICIENT
We see this a lot: Business owners assume their personal auto coverage will take care of them—but when the car is being driven for business purposes, the personal auto coverage will often not cover the accident. Likewise, even if you’re running your business from your attic or basement, a simple homeowner’s policy probably isn’t enough. Don’t make the mistake of thinking personal policies will be adequate for your business.
FAILING TO ADJUST YOUR COVERAGE OVER TIME
Simply put, as your business grows—as you add employees, as you open new locations, as you bring in more clients, etc.—your insurance needs change. We recommend sitting down with your broker or insurance attorney at least every couple of years to discuss the possible need for expanded or adjusted coverage.
NOT READING POLICIES
Insurance policies may not be the most entertaining to read, but it is critical that you know the risks for which you are covered and not covered! Make it a point to be truly familiar with each policy you purchase. Even better, you can hire a lawyer to review the policies and give you his/her insight.
STICKING WITH THE SAME CARRIER FOR TOO LONG
Insurers change over time—and that change may or may not be for the best. As such, it’s important to simply take a look around and explore your options every couple of years. Entertain quotes from different carriers. Explore whether you can get better coverage for a lower rate.
CHOOSING YOUR INSURANCE WISELY
There are plenty of potential hazards here, but with the right guidance, you can get policies that truly keep your business protected. We’d love to talk with you about your business insurance needs; reach out to McLaurin Law today and let’s have a discussion!
Jason McLaurin is a founding member of McLaurin Law. He has over a decade of experience representing clients at trial, arbitration, and mediation in matters concerning insurance policyholder recovery disputes, complex commercial litigation, and catastrophic personal injury claims. He also represents businesses as outside general counsel for clients in a variety of industries including construction, oil and gas, maritime, technology, and professional services. He is licensed and handles matters in both Texas and Louisiana.