Mike runs a plumbing business in Baltimore MD, he suspected that he was overpaying for his commercial policies, but it wasn’t until a year later when he switched insurers that his suspicions were confirmed. He was misclassified and was overpaying by $5000. It was only after we reviewed his policy that we found the error, fixed it and saved Mike thousands money in the process.
Mike’s experience is the exact reason why businesses need to review their business insurance policies every year. Errors made, especially by inexperienced insurers can cost businesses thousands and often aren’t caught for years. Not only that, but they also do a poor job of covering the very risks they’re paying to prevent. Even if the agent did a good job they do a good job the first time around, businesses constantly change and need new coverage.
Many businesses just don’t bother updating their coverage. One web design agency hadn’t updated their coverage for over 10 years, back when the owner was just a working with his personal computer out of his basement.
It’s not just the risk of being underinsured, many businesses are actually overinsured. Most insurance is sold using fear tactics – for only a few dollars a day, you are protecting your business from horrid possible outcomes. With a review you can actually see what insurance you need, not just what makes the agent more money.
It’s common for small businesses to start out with just the basics, such as commercial property and general liability policies. However, as they grow, there are many other types of coverage that get overlooked such as:
- Excess liability or umbrella – This coverage adds extra to the ceiling when the standard coverage isn’t enough.
- Workers’ compensation – This coverage is required in many states and covers medical expenses when a worker gets injured on the job.
- Professional liability –This coverage protects you from professional errors such as bad advice
- Commercial auto – This coverage protects your auto fleet or even if your workers travel to clients
- Employment practices liability – Coverage for HR issues, such as those related to termination, harassment, and discrimination laws.
- Directors and officers liability –Financial protection for directors and officers should they be sued for wrongful acts stemming from performance of their duties.
- Employee benefits liability – Covers liability issues from an omission or error in the administration of an employee’s benefits that results in the employee incurring a cost, such as a terminated employer losing benefits after not being providing with COBRA information.
Depending on your business, many of these insurances may be essential to adequately protect yourself. An annual insurance review is an ideal time to discuss these insurances, as well as your need for them, with your agent. Ensure the following elements are considered as you begin the review:
- Revenue – more business is good, but it also means a greater potential for liability. Have annual sales changed?
- Property – have you added equipment, computers, and such that would create a need to increase your commercial property policy’s limits?
- Location – your business owner’s or general liability policy could be impacted if you’ve added, closed, or moved locations.
- Travel – a hired and non-owned auto policy may be needed if your employees are frequently driving rented vehicles.
- Employees – have you had an increase in your workforce, turnover rate, or use of contractors? Consider employment practices liability insurance for high turnover rates. Workers’ compensation insurance may be a new requirement if you’ve added to your workforce.
- Services – are you offering additional services? For certain types of work, you may need additional endorsements to your general liability policy.
- Customers – are you serving new clients or industries? This may cause problems with your professional liability policy if you’re servicing high concentrations of high-risk clients/industries.
The above answers will be different for every business and usually won’t remain the same over the business’s life, and that’s why insurance isn’t a one-size-fits-all, unchangeable product. Take advantage of these attributes and annually review your business for exposures and insurance needs. Insurance may not cover everything, but it can certainly mitigate your risks. Start your annual business insurance review today by setting up a meeting with your insurance agent to discuss the above issues and how they relate to your current insurance needs.