Having the right kinds of insurance can help shield your business against undue risk. However, small business insurance products can be complicated, and it is extraordinarily easy to make simple mistakes that expose your company to loss or liability. Here are a few common small business insurance errors you will want to recognize and avoid.
20 COMMON SMALL BUSINESS INSURANCE ERRORS
- Not purchasing the insurance you need. It is very common for small business owners to purchase some of the insurance they need, but not all. For example, you may invest in premise liability but not think about E&O insurance.
- Not purchasing business interruption insurance. In particular, you may want to consider obtaining business interruption coverage as part of your property or cyber insurance in order to shield your business from any loss that comes from down time following a property loss, cyber-attack, or data breach.
- Not getting umbrella liability insurance. Your commercial automobile, premise liability, and general liability policies may not offer as much coverage as you think. An umbrella policy can ensure you are fully protected, typically with minimal added expense.
- Not being proactive about health insurance. You do not have to wait until the renewal period to discuss health insurance options with your insurance broker. If you have questions or concerns, or just want to know what options will be available to you in coming years, start that conversation today.
- Not having insurance to cover online sales. If you are selling products on the Web, you will want to get product liability insurance, which can reduce your expenses should any of your products ever be found defective.
- Not reading your policies. Yes, it is tedious and frankly boring (except for insurance lawyers like us!) to read through insurance policies, yet you can save yourself a lot of hassle and headache by making sure you know exactly what is and is not covered in your insurance policy.
- Not having a trusted insurance agent or broker. You need someone in your corner who you can turn to with any questions or concerns about your insurance needs. Make sure you have an insurance agent or broker you feel comfortable with.
- Buying insurance based on price rather than value. A super-cheap policy is not necessarily going to be your best bet; it may not offer you much protection, which means it is basically a waste of money.
- Assuming you do not need commercial auto insurance. Do not just assume that your regular auto insurance policy covers everything; some standard auto policies will not cover you if you are driving the vehicle as part of your job.
- Failing to account for natural disasters. Do you have adequate coverage to safeguard against fire, flood, and other disasters? Many small business owners neglect to cover themselves, yet a natural disaster can be crippling to your business, quickly depleting cash reserves. Good property insurance is an essential protection.
- Not checking your business credit. Be sure to run a credit check before you shop for insurance. Bad credit may make it much more difficult for you to afford good insurance. Get a credit report and challenge any errors you see.
- Neglecting business overhead protection. What happens if you are unable to come to work for an extended period of time? In many cases, it means the bottom line suffers. Business overhead protection can be a good safeguard against this.
- Not giving your insurance agent adequate information. Be very thorough and very forthcoming in talking to your insurance agent about what your company does. That is the best way to verify that you are getting the right coverage.
- Not having the right life insurance. In particular, look into term life insurance that includes protection for chronic or critical illness.
- Not having E&O insurance. Errors and omissions insurance looks very different from one industry to the next. It is useful to have as an important hedge against any fallout from errors or negligence on the part of you or your employees.
- Neglecting your cyber insurance needs. Small businesses are one of the primary targets for cyber-attacks. Make sure you are insured against cyberthreats as a successful breach can cause significant expenses, lost income, and damage to your data.
- Buying online insurance without consulting an agent. You can find a lot of cheap online insurance policies, but typically, you get what you pay for. A good agent will be able to steer you away from policies that are not all they are cracked up to be.
- Not getting life insurance for key employees. We mentioned the importance of having good life insurance for the business owner, but you may also wish to consider it for key executives within your organization.
- Not getting your equipment insured. Do you have technology or machinery that is essential for running your business? If so, you should probably have it insured.
- Being over-insured. Yes, there is such a thing as having too much insurance. Be certain that you are not overpaying for policies you don’t need. A good agent or attorney will be able to advise you.
Any one of these errors could prove costly, but the good news is, they are all avoidable . . . especially when you seek the right expertise. If you have any particular legal questions or needs, please reach out to the insurance team at McLaurin Law today. To speak with a McLaurin Law representative, please call.
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.