When you run a business, smart risk management is always your best defense against loss. Unfortunately, many business owners make costly mistakes – and find out too late they’re not covered. Here are five of the most common mistakes businesses make with their commercial insurance coverage:
- Selecting a carrier on price alone and failing to consider the company’s financial health. Buying business insurance is not the time for bargain hunting. The cheapest insurance usually comes with catches such as missing coverage features, poor service or questionable carrier stability. An insurance company’s financial health is the very first thing you should check when purchasing coverage. You want to know if the company has the resources to honor your insurance contract, pay claims and keep your business protected for the long haul. Check the carrier’s A.M. Best rating, the current “gold standard” for assessing the financial stability of insurance companies. You want to make sure you’re choosing a carrier that makes the grade.
- Carrying too little coverage. It’s not enough to merely have insurance – you need the right amount. Many business owners wish they had higher limits when losses strike. Thoroughly review your operation with an experienced broker and make sure your limits seem reasonable to cover the value of your property, equipment, inventory and lawsuit exposures. Get a tailored, industry-specific coverage package if possible, so that policy features address the unique exposures of your business.
- Not taking time to understand your policies. If you’re a business owner, you’re independent by nature, so it’s tempting to do everything on your own. But too often, that means finalizing your insurance without truly understanding your coverage. Insurance is complex, and nearly every business insurance policy has exclusions, so it’s crucial to work with a professional who can help you thoroughly understand what you’re getting – and what you’re not. An experienced insurance agent should be one of your most trusted advisors.
- Neglecting business interruption coverage. Your commercial property coverage pays to repair or rebuild your property in case of damage. But what happens if you must shut down your operation to rebuild? If you’ve neglected to get business interruption coverage, you’re in for a costly surprise because your commercial property insurance won’t cover your lost income. Business interruption insurance could be added to your commercial property policy or included as part of a business owner’s policy. Ask your agent for details and coverage options.
- Failing to reevaluate your insurance and risk management strategies as your business grows. As your business grows, your exposures change. Perhaps you have more inventory. Maybe you’re offering a new product or service with a unique liability exposure. You may be transporting expensive equipment, or making deliveries. All these changes require adjustments to your insurance. Review your coverage with your agent at least once a year and any time your business moves to a new location, hires more workers, invests in real estate or new equipment or adjusts its offering.
While these are some of the most common, there are many more business insurance mistakes that unnecessarily cost business owners money. Is your coverage adequate? For a comprehensive review, contact the Texas business insurance professionals at Higginbotham.