The consequences of choosing an insurance policy for your business that is not all-encompassing can vary from a small budget problem to more severe money hemorrhaging down the line. Avoid future issues by learning from other’s mistakes to ensure your company does not meet the same setbacks resulting from not having enough coverage, or overspending on unnecessary insurance coverage.
Here are the most common mistakes companies encounter with their insurance and how to avoid them.
1. Choosing Low Limits for Liability Coverage.
The variables associated with lawsuits can make a small business fear the financial damage a large legal complaint could cause. Liability coverage limits are the place to cut corners for the business’ budget. Don’t forget the reason you’re paying for insurance- to protect you in an emergency. If your insurance doesn’t do that, then you’re wasting funds.
Having a high liability limit will only make you more confident in the safety of your investment. With lawsuit amounts being variable, if sued for too much, startups encountering one suit can be forced into bankruptcy. Many vendors and those who rent commercial spaces even require businesses to have a minimum limit to their liability insurance.
2. Making the Cheap Choice.
Know what the plan will cover, and especially what it will not, before making a concrete decision. Shopping around is natural, but only picking a provider solely because they cost a fraction of others can leave you with an insufficient plan. Don’t be tricked into paying more for the same coverage or that with extra benefits you don’t need, but make a knowledgeable decision weighing the plan features and premium amounts.
When beginning a business, combined startup costs are heavy, so the only option could be choosing a less-than-ideal insurance policy. Examination of the exact benefits of your potential plans will determine which within your budget provide the most vital coverage.
3. Disregarding The Policy Booklet.
While, there will be full disclosures and lengthy coverage breakdowns composing your policy, all of it needs to be read, so you know exactly what you’re paying for. An insurance company’s advisors may assure you that you’re getting adequate business insurance coverage. But the truth is, only you know the ins and outs of your business and know what exactly does and doesn’t need to be covered. This is why evaluating each plan yourself is so important.
However, complicated professional phrasing will be used throughout, so the guidance of an attorney or broker may come in handy. Deciphering the fine print will be important to ensure you know exactly what is covered. Too often insurance companies are not required to pay out due to minor specifics the consumer was not aware of.
4. Blindly Choosing a Broker.
Understand that a broker or agent makes commission on your insurance policy premiums. This is your payment for their ability to effectively manage your finances. If you have concerns about your policy, they should be available to meet, and can explain your options in full.
Researching an outside broker before trusting them with your finances will be important. This way you can be sure you choose someone who will truly serve your best interest and not only push pricey plans at you that will allow them to make more of a profit.
5. Not Considering Income Loss Coverage.
It is a given to cover all physical assets under an insurance policy in case of unpredictable damages. If a company’s location needs heavy repair after a disaster, there are other loses to the business, besides what was damaged directly. Yes, we’re talking about the income loss from a business being shut down. This can be covered under particular policies, and should be sought out for most if not all businesses.
Losing time and money sounds bad enough on its own, but think of what these loses will mean for employees. Employees losing wages will be required to search out a new job, leaving you short staffed. Resulting in money lose to continue even after the direct damages have been repaired.
6. Purchasing Limited Property Insurance.
To know how much your property limits should be, know how much your property is worth. Nothing will be replaced past the amount you’ve agreed to as the maximum in the insurance agreement. While lower limits produce lower costs, if that property is damaged and not covered adequately, a provider can refuse to pay for any of the property replacement.
At the same time, paying again and again for a limit well over the current value of your property is the perfect place to cut costs. Getting an accurate determination of a business’s value is a vital step to finding the best priced and most effective coverage.
7. Only Seeing the Negative of Low Deductibles.
Low deductibles seem like the smart approach to purchasing a policy, since it actually costs more. The deductible is the amount you must pay before an insurance agency fulfills the rest of the claim. Do not automatically choose the lowest option, these plans can actually provide more coverage than you need.
Rather, consider what amount your business could pay comfortably, incase of a legal cost or emergency, and what are the chances of large business claims occurring within the company. Having this in mind you can determine if you need to pay more yearly to protect yourself, or if the one-time higher deductible is appropriate for your business.
Also, the larger a deductible is, the more motivation there is to protect that property.
8. Not Adapting to Your Growing Company.
In all phases of your business, the insurance needs will evolve along with company growth. Do not be afraid to switch policies when the business expands. This can include procuring more coverage, or bundling insurance policies as you introduce different branches to your company.
Even if when staying with a single provider, update the policy with any updated information on the business, whether producing additional products, or changing location. The rates can change accordingly, and usually for the better when safety concerns are addressed.
Schedule a meeting with your agent to go over the policy a few months before the next premium is due to see if your business needs have changed, then begin examining different limits and forms of coverage.
9. Loyalty to Their Provider.
When you stay with an insurance company for extended amounts of time, it can seem natural to stay loyal to them, but just like any business, rates can be inflated compared to others in the same industry. So, if a provider’s performance is lacking and there are better packages offered elsewhere, consider switching business insurance providers. Any company’s services can decline, so do not stick with an insurer simply because they once had premium services.
Protect Your Investment.
Certain aspects of insurance can easily be overlooked among the mass amount of matters involved in opening a business. Do not consider this time to focus on what saves the company money upfront because that could leave it vulnerable in the future. This business is the fruition of your hard-work and original ideas, so make sure it is properly protected.