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Why 75% of Businesses Have the Wrong InsuranceVirginia Hamill
Chances are you're underinsured. According to Insurance Journal, 75 percent of businesses are. That might not be a problem for a megacorporation that has the resources to deal with a disaster. But for a small-business owner, minor incidents can easily turn catastrophic if they aren't prepared. It's not that owners don't want to protect their businesses. It may just be that they've made one of these five common insurance mistakes. Mistake #1: I Don't Need Insurance for My Side GigYou're still a business owner if you've offer goods or services for a profit, even if you call yourself a freelancer, independent contractor, or moonlighter. So while you might think "side gig," your clients might think "responsible party" – especially if your business relationship goes south and they sue. Lawyer bills and court fees can put a major dent in your bank account. Sufficient coverage, however, can cover these costs and keep your microbusiness afloat. Mistake #2: I Don't Know What Insurance I Need Like most small-business owners, you probably know you need some kind of insurance. But when it comes to specific policies, you might not be aware of your options or what they mean. And you're not alone. In fact, a study from Software Advice shows 67 percent of small-business owners don't know Cyber Liability Insurance exists. No one expects you to be an insurance expert, but there are some easy ways to figure out which policies may benefit your business. For example, try Policy Buddy, a two-minute diagnostic that offers policy suggestions based on your business's details. Mistake #3: I Can't Afford Insurance When money is tight, insurance might seem like an easy expense to cut, especially if you've convinced yourself that disasters only happen to other folks. In reality, 40 percent of small businesses will likely experience a claim in the next 10 years. Those claims aren't small potatoes either. The top 10 incidents cost $8,000 to $50,000. Compare that to the cost of General Liability Insurance, which averages $575.16 a year and offers broad protection for common lawsuits. But if the price tag still seems a bit steep, there are plenty of ways to find less expensive insurance. For example, some insurance providers bundle key coverages in a Business Owner's Policy (BOP). It usually helps business owners get insured at a lower rate. Mistake #4: My Property Isn't ValuableMaybe your business is just you, a desk, and a laptop you've had since college. Or perhaps it's the craft room you set up in your garage. Whatever your business is, it most likely needs some stuff to operate. And that stuff doesn't have to be top of the line to be valuable to your business. Think about it this way: how long could your business last if you lost your computer or had to replace inventory? That's a scary thought, which is why Commercial Property Insurance is so important. It can pay to repair or replace your gear when it's lost or damaged by certain events. Mistake #5: My Homeowner's Insurance Covers My BusinessLet's say robbers break into your home office and take your computer. Your home is insured, so the theft should be covered, right? Unfortunately, that's not how it typically works. Most homeowner's insurance polices explicitly exclude coverage for work-related activities and property. So your insurer may pay for your broken window, but that computer replacement is probably coming out of your pocket. Mistake #6: I Didn't Know Growth Required More InsuranceYou might have started your business with just a dream and an Internet connection, but now your operations are growing. That's a pretty happy place to be, but it also means you have more responsibilities, such as…
Most of these risks are manageable – to an extent. But when management fails, insurance picks up the slack. |
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