Purchasing a minimum amount of liability insurance for businesses can be a mistake in itself for business owners, but there are other common errors made when investing in this type of coverage.
Not understanding the two types of policies available – There are two different type of liability policies that can be bought by business owners. When buying a claims made plan, your company will have coverage against and claims made throughout the term decided on. This type of liability coverage must be kept up-to-date to avoid a lapse in protection, so business owners are urged to be aware of upcoming expiration and renewal dates. Those who invest in occurrence policies buy protection against negligence that may have taken place when a policy was active. This extends coverage even if the initial policy has expired. This may be a great option for business owners who operate a company that has had claims or that are in a riskier industry.
Signing up for coverage through an unstable insurer – One great thing about insurance is the number of competitors that often provide good rates for business owners. While the terms, conditions and premium being offered may seem perfect, if the company is not financially strong, it could lead to larger issues later on. Should an economic crisis occur, you will want to be insured by a company that will make it through and that can pay a claim should you need to file. There are many online resources that can be helpful, including ratings services and reports from companies that review financial factors.
Being unaware of the claim process – While many steps for filing a liability claim are the same or similar for insurance providers across the board, you may need varying information. Not knowing what is necessary when filing could cause a delay in refund or a claim being denied. Some basic things to remember are to notify your insurance company as soon as possible, provide details on when and where the accident or incident occurred, police reports, witness reports and information regarding any injuries or damages that occurred.
Not telling your employees about coverage – Liability coverage is often purchased to protect your clients and consumers, but your employees will also want to be informed of how liability insurance is extended to them. If your policy doesn’t offer the type or amount of protection they see fit, they will then have the option to purchase an individual policy. Additionally, you won’t want them to invest in a separate policy if they already have protection through your liability business insurance. Depending on what your company does, it may be a requirement to purchase professional liability insurance, though this can differ across industries and in different states.
Many small business owners may be on the lookout for ways to cut expenses to help keep things affordable. However, not purchasing liability insurance can result in a pricey lawsuit or having to close your company doors because of financial obligation due to an accident or incident. Even a basic policy would be better than not having one at all, but depending on the amount of assets and other business investments you have made, you could really benefit from buying additional coverage. Limits can be fairly low, which may be fine for small businesses, though it is important to modify any commercial insurance plan when your company grows larger or obtains expensive assets like new technology or equipment.