Owning a business comes with various risks. Whether you’re a start-up or have been in the industry for quite some time, you can still experience problems along the way. One of the ways to protect you from these risks is to get business insurance. However, getting the minimum business insurance policy isn’t enough. Before settling on a business insurance policy, you should know your business needs first.
But even if you already have business insurance, there are instances when you might fall into being underinsured, when that happens, your business isn’t as safe as expected. In this article, we’ll discuss the signs that your business is underinsured.
1. Growing Business
As your business grows, you also need new equipment, a bigger office or store, and more inventory. When this happens, you also need to update your business insurance according to your needs. Unfortunately, failing to include the new assets in your policy can significantly impact your whole business in case of a loss.
For instance, if the old business set-up is all that’s insured, the claims won’t be as big as you need. In the end, your business might still collapse due to insufficient funds.
2. Changes in Business Operations
Another sign of having an underinsured business is when there’s a change in business operation that’s not included in the current insurance policy.
As your business evolves, you may include additional products or services that require more comprehensive business insurance. For instance, if you include delivery services in your business plan, you should also avail of commercial auto insurance. If you don’t, the probability of lawsuits and accidents will increase.
3. Hiring More Employees
When expanding a business, you also need to increase the number of workers to manage the workload more efficiently. At the same time, these new workers need to be insured, especially since they’re prone to accidents and other risks while working. Even if they’re working on the offer, many things can happen that may affect their health and productivity.
4. Rising Costs of Goods and Services
The price of goods and services often changes. Since the market fluctuates now and then, you need to update the costs to reflect the market value. For instance, if you’re offering laundry services, you should always update the cost of water supply, detergent, fabric condition, and bleach. As these products and services increase in value, your service fee should also increase. On the other hand, if you don’t update the valuation, your insurance claims might not be enough when you encounter a loss.
5. Limited Liability Coverage
As your business expands, your client base also increases. This also requires an increase in the liability coverage limits. In this case, you should consult with your insurance adviser about the coverage limit recommended for the size of your client base.
Increasing your insurance limit can protect your business against lawsuits, including liabilities under professional errors, accidents, and product liability.
6. Not Having Business Interruption Insurance
When managing a business, there are instances when you suddenly need to pause operations. It can be due to fire, natural disasters, or lawsuits. Unfortunately, without business interruption insurance, your business might not recover after all.
On the other hand, having business interruption insurance can help you with finances, such as rent, employee salary, bills, relocation costs, and loan payments. Additionally, updating the business interruption insurance is also essential to make sure that your claims cover all necessary finances.
7. Lack of Cyber Insurance
In the digital age, most businesses use online platforms for transactions. Whether you store data or financial information online, having comprehensive cyber liability insurance is a must. Sure, some businesses may invest in anti-virus and other forms of protection, but having cyber insurance can be another layer of protection from hackers.
Besides, if unfortunately someone hacks into your system and steals all the payment information of your customers, your business reputation and the financial situation might all go down the drain. On the other hand, having insurance can save your brand and you can have financial assistance that will cover lawsuits and other bills.
8. Outdated Property Insurance
Physical assets are important when managing a business. If you add more branches or your main office expands, you should immediately update your property insurance policy. Even if the expansion is in the same property, parts of it aren’t included in the policy. So, when unfortunate incidents happen, your insurance won’t cover all the repairs and replacements.
9. Haven’t Review Policy Lately
If you haven’t reviewed your insurance policy lately, this is a reminder that you should. Although it can be one of the time-consuming parts of managing a business, it’s one of the essentials that can save your company in case bad things happen.
10. Unfamiliarity with Policy Details
Aside from not reviewing your insurance policy, you might also not be familiar with the essential details. Availing of a business insurance policy isn’t something you should forget once done. It should be one of the things you always keep in mind since your business often faces risks.
Final Thoughts
As a business owner, it’s your responsibility to keep your business from being underinsured. By recognising the signs listed above, you can regularly update your business insurance and keep your business safe from all possible risks.
