6 Insurance Mistakes Business Owners Make
One of the mostly costly and damaging mistakes business owners make is not having the right kind or amount of insurance in place to protect their business and their income. Thinking they understand the ins and outs of commercial insurance, they move forward without working with an experience agent or getting a true picture of their true needs and the insurance coverage they need to properly manage their risk. Unfortunately, making this kind of mistake can actually cost more than just money; it can cost you your business.
Here are 6 common mistakes businesses make with their insurance.
1.Not Buying Insurance
This is, by far, the biggest mistake business owners make. Whether it seems like the benefit doesn’t justify the cost or they don’t realize they need coverage, not buying insurance is the biggest mistake any business can make. Business owners don’t realize that it only takes one lawsuit to shut them down. They feel that as long as they follow the rules, operate legally, and do what they are supposed to do, they will be immune to litigation. What they don’t realize is that even if they are sued and they win, the cost of defending themselves against any lawsuit, even unfounded, may be enough to bankrupt their business.
2.Buying Inadequate Coverage
Many businesses that do purchase insurance don’t actually buy enough to cover their potential losses. Business owners don’t realize this mistake until it’s too late and they are stuck paying for attorney fees and legal settlements out of pocket. Purchasing inadequate coverage is only slightly better than not having any coverage at all.
3.Buying the Wrong Coverage
Alongside buying inadequate coverage is buying the wrong coverage. Business owners who don’t work with an insurance professional to assess their risk and secure the right coverage to protect their business from losses, run the risk of having to cover costs that are not covered by the policy they purchase.
4.Going Without Business Income Coverage
Business income coverage, which is also called business interruption insurance, provides financial support when something interrupts your ability to conduct business. Going without this coverage can endanger the business as much as going without liability or property coverage. For example, there is a fire in a retail shop that destroys or damages all the merchandise forcing the shop to close for three weeks. The business owner’s property insurance covers the lost merchandise, but without business income coverage, the business owner has no way to recover the lost income from having the shop closed for three weeks.
Business owners who buy the right amount of the right coverage can still run into problems if they don’t understand what things are specifically excluded from their policy. Most business insurance policies are full of exclusions and business owners who don’t understand these exclusions can be left holding the bag when they thought they were covered.
6.Carrying Low Deductibles
Business owners can decrease their costs while still protecting their business by increasing the deductible on their policies. Carrying a low deductible on your policy may seem like the better business decision because it offers more protection, but it may not be the right decision for your business. High deductibles reduce your overall operating costs while offering protecting you from the kinds of losses that could compromise your business.
The best way for business owners to ensure they have the coverage and protection they need is to work with a qualified insurance professional. Their agent or broker can assess their needs and then help them find the best insurance package to meet them.