You could work for years building up the perfect business. But if something goes wrong, which is often, and you don't have enough insurance coverage, you may have to close your doors. Here are some mistakes to avoid when obtaining insurance for your small business.
Not Reducing Rates
Business owners need a wide range of insurance policies, according to brokers like Associated Insurance Professionals. Every professional has different needs and does not need every policy that exists. A few of these policies include:
- Workers' compensation
- General liability
- Professional liability
- Business interruption
- Property insurance
When combining several policies together, you could pay well over $100 per month. Bundling the policies helps you save as much as 5% up to 25% on the total cost. However, many small business owners ignore the importance of cutting the rates on their insurance plans.
Mitigating the risks of doing business is another way to save money. Insurance companies want to insure businesses that are less likely to file claims. They prefer those that are safe and responsible instead of risky and dangerous. You can reduce your rates by proving that your business practices, along with its building and operations, are safe.
Not Getting Enough Coverage
Even worse than paying too much for insurance is not getting enough of it once a disaster happens. You'll have tens of thousands of dollars to pay for bills out of pocket. It's usually too late once you find out that you need more coverage. In several cases of natural disasters, many business owners have made the mistake of not obtaining flood or hurricane insurance. As a result, they've had to shut down their businesses permanently or pay for property repairs out of their own savings. You can prevent all of these problems by making sure that you have enough coverage from the beginning.
Getting Too Much Coverage
Just as inefficient as paying rates that are too high is having too much coverage. You'll waste money paying for a policy that you'll never use. Instead, the money could be used to pay for other important expenses like marketing, job training and technology.
A different business in the same industry may have different insurance needs. Some restaurants may need flood insurance while others will not need it. When choosing which policy to buy, evaluate your business's risks first.
Not Buying Insurance That Is Used Immediately
Another common mistake is not buying insurance that you use immediately. Many people are reluctant to buy certain policies, such as business interruption or workers' compensation insurance, because they assume they won't need it at all. That is why businesses are required to carry workers' compensation insurance in many states.
Buying insurance is a tricky endeavor for most small business owners. They don't want to waste money on useless policies. However, the ones who don't spend enough will be regretful when they run into problems and need additional coverage. The most important task is to evaluate all of your business's needs and risks before buying the right policies.