As a small business owner, you’ve likely spent a lot of time and effort ensuring your business is properly protected with the right insurance coverage. After all, protecting your assets and mitigating risks are critical to your business’s survival and continuity. However, many business owners make the mistake of assuming their insurance policy will be enough indefinitely and neglect to review their coverage annually. This guide outlines the key reasons why you should regularly review your business insurance.
Why You Need to Conduct a Business Insurance Review Regularly
We get it – it’s easy to put off insurance reviews when you’re busy with day-to-day operations. However, skipping your annual review can have serious financial and legal consequences. Here’s why:
1. Staying Compliant with State Laws
Certain types of business insurance are not optional, they are legally required at both state and federal levels. If you fail to update your policy as your business evolves, you could unknowingly violate these legal obligations, leading to fines, penalties, or even the loss of your business license. Here are some examples of insurance coverage that may be mandatory depending on your state:
- Workers’ Compensation: Businesses with employees must legally required to carry workers’ compensation insurance to cover workplace injuries or illnesses.
- Commercial Auto Insurance: If your business uses vehicles for operations, you need to meet specific state liability requirements to protect against accidents or damage.
- Professional Liability Insurance: Certain industries, such as healthcare, legal services, and financial advising, often require professional liability insurance to cover claims of negligence, errors, or omissions related to professional services.
2. Avoiding Policy Cancellations and Ensuring Continuous Insurance
Insurance policies are based on the information you provide when you first purchase them. If your business undergoes significant changes and you don’t update or review them with your insurer, your policy may no longer reflect your actual profile. In such cases, your insurer may cancel your policy or deny a claim if they discover undisclosed information that increases your risk. You should report these common business changes to your insurer to ensure ongoing coverage:
- Relocating or Expanding Your Business: Moving to a new location or expanding your business footprint could increase your risk by leaving gaps and may require an update to your commercial property or liability insurance coverage.
- Hiring More Employees: Especially if your new hires work in higher-risk roles, such as construction or manufacturing, your workers’ compensation and liability coverage may need adjustments.
- Offering New Products or Services: Introducing new products or services exposes you to additional risks that weren’t initially included in your policy. Make sure your coverage reflects these changes.
- Upgrading Equipment or Acquiring New Assets: You should disclose or include any valuable assets, like new equipment or technology, in your inland marine policy for protection against loss or damage.
3. Avoiding Underinsurance Risks
As your business grows, so do the risks associated with it. A policy that was sufficient when you first started may no longer provide enough coverage as your operations expand. If you experience a loss and your coverage limits are too low, you may end up having to pay out-of-pocket to cover the difference. Common scenarios where underinsurance can be an issue include:
- Property Insurance: If you’ve purchased new equipment or renovate your space, your policy should reflect the updated value of your assets.
- General Liability Insurance: If your customer base has expanded, you may need higher liability limits to protect against potential lawsuits.
- Cyber Insurance: With increasing cyber threats, businesses that store sensitive customer data should consider cybersecurity coverage.
4. Missed Savings
Every dollar counts when you’re running a small business, which is why reviewing your insurance policies annually can help you identify ways to reduce premiums while maintaining the right level of coverage. You may discover opportunities to save, such as:
- Bundling Policies: Many insurers offer discounts if you bundle multiple policies, such as property, liability, and workers’ compensation, with the same provider. This can result in significant savings on your premiums.
- Increasing Your Deductible: Raising your deductible can reduce your monthly premiums. However, be sure that you can afford the deductible if you need to file a claim.
- Eliminating Redundant Coverage: As your business evolves, you may find that certain coverage is no longer necessary. For instance, if you’ve stopped offering a particular service or no longer use certain equipment, you could remove that coverage to save on premiums.
5. Protecting Your Business
In today’s highly competitive market, maintaining a strong reputation is crucial to your business’s success. A claim or lawsuit can tarnish your brand, even if you win in the end. Insurance coverage, particularly liability and professional liability, helps mitigate these risks. Regularly reviewing your insurance policies ensures that your business is protected from legal disputes or accidents. For example:
- General Liability Insurance: A lawsuit, even if frivolous, can harm your reputation. Liability insurance helps cover legal fees and settlements, allowing you to manage such situations without putting your business at risk.
- Professional Liability: For businesses offering services such as a nail salon or accounting firm, a claim of negligence or poor performance can damage your reputation. Professional liability insurance covers you in these situations, allowing you to resolve conflicts without lasting harm to your brand.
Take the Next Step in Protecting Your Business
Regularly reviewing your business insurance is not just about staying compliant – it’s about protecting your company’s future, reputation, and financial health for many more years to come. If you’ve experienced any changes in your business or simply want to ensure you’re getting the best coverage at the best rates, we’re here to help. Call us today at (866) 570-7335 for a free, no-obligation quote and ensure your business has the right protection in place.
The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may differ from those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.
