12 Common Mistakes You Should Avoid While Buying Business Insurance
If you have your own business, your responsibility becomes higher than others. And so, it’s essential to get protection for your business in the form of insurance for your business as well as your employees. However, due to lack of knowledge or getting carried away or for any other reason, small business owners often make some mistakes while buying an insurance policy and these mistakes prove to be costly. Here are some such common mistakes that you should avoid to make the most of your business insurance and cost you the least.
1. Not Buying Cyber Insurance
Internet-based risk should also be taken into consideration if you are a small business owner. And here you should buy cyber insurance. It is meant to help a business reduce risk exposure by counteracting expenses involved with recovery following a cyber-related security breach. Sadly, only about 58% of small business owners buy cyber insurance. Cyber-security risks put many businesses into loss and buying cyber insurance can avoid this.
2. Not Getting an Errors and Omissions Policy
An E&O (errors and omissions) policy may be useful if you are a manufacturer. E&O protects you from claims made by customers for incomplete work or negligent actions in your products. The costs of resulting lawsuits could bring you a major expense and if you have a small but growing business, it can be under a great distress.
3. Not Buying Liability Insurance
It’s a common tendency among small business owners to assume that they will get protection from an LLC or Corp in case of lawsuits. Nevertheless, unforeseen episodes can take place that may cause a lawsuit and it can be expensive and can shut down your business. Therefore, having appropriate liability insurance is essential for every small business owner for their trade/industry. By joining industry organizations, you can get a discount on insurance.
4. Not Knowing about Your Business Credit Before Buying a Policy
It’s often seen that insurance buyers forget that the insurance providers may go through their business credit score as a part of the endorsing process. If in such a case, your credit score is poor, getting the insurance you need may become troublesome and even more expensive. Therefore it’s necessary to check first your credit history before looking for an insurance policy.
5. Lacking in Insurance for Online Sales
These days, online side of a business is being proven to be a great help to boost the revenue of several small businesses. However, you should remember that if by mistake, any defective product is delivered to your customer, it can cause lawsuits that can be expensive. This can be avoided by having product liability insurance. This insurance will protect you against such lawsuits. Also, another type of insurance policy, known as contingent business income (CBI) insurance can protect you against monetary losses resulted from damage to property owners.
6. Not Getting Coverage for Your Property and Equipment
While liability insurance is perhaps the most important insurance for all small businesses, it’s also important to get coverage for your business assets. Business equipment insurance covers the cost of damage or loss to property or equipment used by your business. Especially if expensive equipment is necessary for your business, sufficient business equipment insurance is a must for you.
7. Not Going Through Terms and Limitations of Insurance Policies
This is a common mistake made by small business owners that they don’t go through and understand the true complications of the terms and limits of the insurance policies. Insurance policies contain several industry-specific terms and you should understand them. It’s essential to understand every single commendation and elimination in the insurance policy and make sure you go through all the information before agreeing with the terms. You can also take help of an insurance broker or advisor for this.
8. Not Buying an Umbrella Policy
An umbrella insurance policy is an additional liability insurance meant for helping protect you from prominent lawsuits and claims. It not only gives you extra limits but also offers extra coverage that is not available in the basic coverage. It also offers coverage for claims that may be omitted by other liability policies such as libel, slander and false arrest.
9. Not Submitting Sufficient Essential Information
It’s essential for business owners to submit all the essential details. This will enable the insurance provider to understand what your business does to recognize the desired and required coverage. Each business is different and therefore the risks related with every business are not the same. Giving your correct information will enable your insurance provider to suggest you the right insurance.
10. Purchasing a Policy Considering Price Rather than Value
Insurance is treated as a commodity by most small business owners and due to this, they purchase a policy considering the price instead of value. Actually, business insurance can never be one size fits all type. It’s important that the provider understands your business and tailor the coverage to meet your requirements. So, cheap policies cannot be always good for your business.
11. Not Buying Keyman Life Insurance
This is also a common mistake. Keyman insurance should be bought on key employees or partners and cover keyman’s life as a beneficiary. It can save your business if that person expires or becomes disabled and can work no longer. The coverage amount helps counterbalance what it would cost to replace the key employees.
12. Purchasing a Cheap Online Insurance Policy
It seems easy to buy a cheap insurance policy after a little search on Google. However, buying such a policy to pay out on a claim may be way more problematic. Typically, terms and conditions may be hidden in the small print and they may be in the form of not being covered for working for clients in another country. In that case, it’s essential to understand the policy thoroughly and discuss with an insurance advisor or broker.
If you avoid these common mistakes while buying business insurance, you can get a great peace of mind because you have made your business safe and secure from all sides as mentioned above and get protection in any possible case.