The importance of protection for your business can’t be overstated. From protecting your business from liability insurance to ensuring that your assets aren’t harmed, everyone needs to make sure to purchase insurance policies that make sense for them, and their business.
However, it’s important to remember that all insurance policies are different, because every business is different. An insurance policy that works for a sole-proprietor won’t make sense for a 100 employee company. You also want to make sure to read the details so that you can guard yourself against potential business insurance risks.
With this in mind, read on to learn all about buying business insurance as well as the major pitfalls you need to avoid!
Business Insurance Pitfalls
1. Purchasing Cheap Policies
One of the major mistakes is that business owners purchase the cheapest policy they can find. We understand that being a small business owner is tough, especially in the beginning when you’re precariously balancing your budget. However, purchasing a policy simply because it’s cheap may not be giving you the protection you need.
It’s important that you compare apples to apples with respect to your insurance. If you solicit quotes from various online companies, be sure you read the fine print. This is because cheap policies may contain numerous exclusions that you actually need protection for, such as catastrophic damage that you couldn’t prepare for.
2. Choosing the Lowest Deductible
Deductibles can help you save money on premiums over time by absorbing small payments out-of-pocket. For this reason, choosing a low deductible may not be the best decision for you because you’ll end up paying more for your premiums over time. Instead, consider your budget and what is the maximum deductible your business is capable of paying.
If small losses happen, you won’t be breaking the bank by paying out of pocket. You’ll also be saving more money over time on your monthly premium payments.
3. Not Adjusting Coverage
It’s understandable that a small, growing business may pay for insurance that’s not as robust. Although insurance is important, you also don’t want to bankrupt yourself by struggling to pay for high premiums. On the other hand, many business owners make the mistake of not adjusting their coverage as their business grows.
As you purchase more vehicles, commercial properties, or hire more employees, your liability grows as well. This is the reason why you need to make sure to adjust your insurance policies as your business grows. To make it easier, make sure to speak with a local insurance agent, like Kicker Insures Me, who will give you their recommendations based on your business’s size, location, infancy and needs.
4. Ignoring Income Losses
When it comes to purchasing insurance, you also need to ensure that you’re protecting yourself from potential income losses. Business income insurance can help you if you have to suspend your operations due to a physical loss. You’ll need to read the “covered perils” of your insurance policy in order to see what a physical loss entails, but this could be damage to a property that you’re renting to tenants.
5. Not Studying Your Policies
The importance of reading policies can’t over overstated. Even if you find an insurance policy that seems right for your business, it’s important that you take time to read the fine print or at least go over it with your local insurance agent. You don’t want to wait until a loss occurs to read what your insurance covers and find that it’s not included.
Insurance policies are often hard to read, but there are some readability standards in place today in order to protect consumers. Don’t hesitate to contact a lawyer or get a second opinion if you’re having difficulty.
6. Underestimating the Limits You Need
Although lawsuits may seem rare, no matter how large or small, a business can still be hit by one. You want to be able to continue operating your businesses without claiming bankruptcy while this happens. However, it can be hard to judge how much liability insurance you need, especially when you have a small budget.
If you work for other businesses under contracts, they may have stipulations in place that require you to have business insurance with a specific limit. If you have an LLC, you can get away with a lower amount of liability insurance. However, people who run sole proprietorships may want to pay for more liability insurance because their personal assets are tied up with the business.
7. Not Purchasing Additional Insurance
Depending on your industry and the services and goods you provide, general liability insurance or errors and omissions insurance alone won’t provide you the best coverage. This is because you may be using specific equipment or selling products that will need their own insurance.
For instance, photographers that fly drones for real estate companies often don’t find drone coverage in their general liability insurance plans. They’ll need to purchase drone coverage from a separate company in order to make sure they’re fully covered. If they don’t purchase drone coverage and a drone damages someone’s property, their general liability insurance won’t cover that for them.
Cyber liability is also an additional policy that’s necessary if you’re collecting customer’s personal data online.
Do your own research depending on your industry and make sure all your bases are covered!
Buying Business Insurance: Do Your Research
Buying business insurance may feel daunting at first, but you’ll have peace of mind once a purchase is made knowing that you’re fully protected. On the off-chance that a mistake you make leads to a client’s financial loss or someone is injured on your property, you’ll have less to worry about with respect to your own assets being seized.
However, it’s important to remember that the cheapest policy doesn’t necessarily mean it’s the best. Take some time to read the fine print and consider how the insurance policy covers your own industry. This way, you won’t be caught by surprise when it’s time to make a claim!