Top 5 Mistakes Businesses Make With Commercial Insurance
Without question, every business should prioritize getting commercial insurance. This vital safety net can save business owners from financial disaster during vulnerable or unpredictable times.
However, some business owners make critical errors in this regard. Commercial insurance agents repeatedly see many of their clients making the same mistakes. If the agent doesn’t sound the alarm, the following five mistakes could seriously impact a client’s financial health.
1. Being Underinsured
Perhaps the most common error that commercial insurance agents see is underestimating what coverage a business might need. For example, a client may undervalue the value of their property or the scope of their liability. As a result, they may find that their policy comes up short when the unexpected happens.
To avoid underinsurance, business leaders should make regular assessments of their operations and assets. They need to account for a wide range of scenarios and determine the true level of coverage they need.
2. Failing to Review and Update Coverage
Businesses undergo many changes. A company might expand its customer base or develop a new range of products. It may update equipment and machinery to prepare for an expansion. When that happens, company leaders may need to adjust insurance coverage to adapt to these new needs — but many forget to do so.
To ensure your coverage keeps up with your growing company, take time to assess the state of your business at least once a year. Work with your insurance representative to identify coverage gaps or outdated policy terms.
3. Ignoring Business Interruption Coverage
An unexpected event can force a business to pause operations. Fires and natural disasters, for example, can result in extended periods of lost revenue — something that many owners don’t account for in their insurance coverage.
Business interruption insurance can offer a baseline of financial stability in the case of an extended closure. It’s a key add-on that can be the difference between a company’s survival and its extinction.
4. Prioritizing Low Cost Over Quality
All businesses seek to maintain profitability. They often cut operating expenses to improve their bottom lines. Some businesses select cheaper options for insurance coverage to limit their costs — and often, that limits their coverage.
While it’s reasonable to find opportunities to save money, doing so at the expense of adequate insurance coverage can be a mistake. Work with your commercial insurance agency to form a plan that’s cost-effective but comprehensive.
5. Overlooking or Misunderstanding Exclusions
Some business owners assume they’re insured for certain conditions or items that are actually excluded from their insurance policies. That mistake can be fatal if the worst-case scenario happens.
Commercial insurance policies can be complicated, but it’s crucial to know what parts of your business are not sufficiently covered in your insurance agreement. Work with your insurance agent to clearly understand the exclusions in your policy. If a vital part of your business is excluded, ask for add-on coverage or other solutions that may protect your finances.
Learn How to Avoid Common Business Insurance Errors
Mistakes are part of life, and no business is perfect. However, these common insurance errors are avoidable and correctable. Work with a commercial insurance agent to make adjustments to your policy for comprehensive coverage and security.