5 Costly Insurance Mistakes Businesses Make (and How to Avoid Them)
Running a business comes with risks, and insurance is one of the best ways to protect you and your company from financial setbacks. However, many businesses make critical mistakes when it comes to their insurance coverage errors, that can cost them thousands or even jeopardize their survival. Here are five costly insurance mistakes businesses make and how to avoid them.
1. Underinsuring or Overinsuring the Business
Many businesses either underestimate their coverage needs or end up paying for policies that provide more protection than they require. Under-insuring can leave you exposed to significant losses, while over-insuring means unnecessary expenses that could be better allocated elsewhere.
How to Avoid It: Regularly assess your business’s risks and work with a knowledgeable insurance broker to determine the appropriate level of coverage. Adjust your policies as your business grows or changes.
2. Ignoring Business Interruption Insurance
A fire, flood, or natural disaster can halt operations, leading to revenue loss. Many businesses only insure their physical assets but forget about the financial impact of downtime.
How to Avoid It: Invest in business interruption insurance to cover lost income and ongoing expenses during a shutdown. This ensures that even in the face of unexpected disruptions, your business can stay afloat.
3. Failing to Update Policies as the Business Grows
A policy that was sufficient when you started your business may not be enough as your company expands. New assets, employees, or services may require additional coverage.
How to Avoid It: Review your insurance policies annually or whenever there are significant changes in your business, such as hiring more employees, expanding operations, or acquiring new equipment.
4. Overlooking Liability Insurance
Many businesses focus on property coverage but neglect liability insurance, which protects against lawsuits, customer injuries, and professional errors. One lawsuit can cripple a small business financially.
How to Avoid It: Ensure your business has general liability insurance, professional liability insurance (if applicable), and product liability coverage to protect against legal claims.
5. Choosing the Cheapest Policy Without Considering Coverage
Cost-cutting is necessary for business survival, but opting for the cheapest insurance policy can be a mistake. Low-cost policies often come with limited coverage, high deductibles, and exclusions that leave you vulnerable.
How to Avoid It: Compare policies not just on price but on coverage, limits, and exclusions. Work with an experienced insurance broker to find a balance between affordability and adequate protection.
Final Thoughts
Insurance is a critical investment in your business’s future. Engaging a risk advisor and a reputable insurance broker can save you from costly financial losses and help ensure the long-term success of your company. At Hillspan Insurance Brokers, we specialize in helping businesses find the right coverage tailored to their specific needs. Need expert advice on your business insurance? Let’s talk via email at info@hillspangroup.com or by phone at +254 709 075 500 / +254 769 487 794 for personalized assistance!
