Commercial Insurance Mistakes That Could Cost Your Business

Commercial insurance is a vital safety net for businesses of all sizes. It protects against financial losses caused by events like theft, fire, legal action, and accidental damage. Without it, many businesses would struggle to recover from unexpected incidents.

However, simply having commercial insurance isn’t enough. The type of cover, how it’s managed, and whether it matches your business needs are just as important. A mistake in any of these areas could leave your business exposed when it matters most.

In this article, we’ll explore common commercial insurance mistakes and show you how to avoid them. By staying informed, you can make sure your business is fully protected.

Mistakes Businesses Commonly Make with Their Insurance

Even businesses that have insurance can make mistakes that affect their level of protection. These mistakes often go unnoticed until a claim is made—and by then, it may be too late.

Not Updating Policies When the Business Changes

Your insurance policy should reflect your current business operations. If you’ve added new services, changed locations, or hired more staff, these changes need to be reported to your insurer. If you don’t, your policy might not provide the right level of protection.

For example, if you moved to a larger warehouse and didn’t update your property details, a fire might leave you underinsured. Similarly, if your revenue has grown but your cover amount hasn’t, a claim might not pay out enough to recover your losses.

Make it a habit to review your policy at least once a year—or sooner if something significant changes in your business.

Choosing the Cheapest Policy Without Checking the Details

Price is always a concern, especially for small businesses. But going for the cheapest insurance policy could leave you under-protected. Low-cost policies may exclude important areas of cover like stock, tools, or business interruption.

It’s important to look beyond the price tag. Read what is included, what is excluded, and whether the policy matches your risks. Spending a bit more on better cover can save a lot of money in the long run if you ever need to make a claim.

Always compare policies based on value, not just cost. A more complete policy often provides far greater protection and peace of mind.

Assuming One Policy Covers Everything

No single policy can cover all risks. Commercial insurance typically includes several types of cover, such as public liability, professional indemnity, employers’ liability, and property insurance. Each of these covers different risks.

Some businesses believe that taking out one general policy will protect them from all situations. This is rarely the case. For example, cyber cover is often not included by default, even though it’s essential for businesses that store customer data online.

To get full protection, talk to a broker or adviser who can help you understand which types of insurance you need based on your work and industry.

The Risks of Being Underinsured or Misinformed

Underinsurance is when your policy does not cover the full value of your business assets or activities. This can lead to reduced payouts if you make a claim. In some cases, you may receive only a portion of the money needed to replace lost or damaged items.

For example, if your equipment is worth £100,000 but you’re only insured for £60,000, a fire could leave you £40,000 out of pocket. That kind of shortfall can be hard to recover from, especially for smaller firms.

Another serious issue is giving wrong or incomplete information to your insurer. This might happen accidentally or due to confusion about what’s required. Either way, it can result in a claim being refused or the policy being cancelled.

Always be honest and accurate when applying for or renewing your policy. Update your insurer if your turnover changes, if you move, or if you add new services. Also, read the policy wording carefully and ask for help if you don’t understand something.

It’s also important to check for special conditions or exclusions. Some policies include conditions that must be met for a claim to be paid. For example, some might require you to have specific security measures in place, like CCTV or approved locks.

Overlooking Optional Cover That Matters

Optional cover is often overlooked because it’s not part of the basic package. But these extras can provide important protection depending on your business type and industry.

One example is business interruption insurance. If your business can’t trade due to a fire, flood, or equipment failure, this cover can replace lost income and help you stay afloat while you recover. Without it, even a short closure could cause major losses.

Cyber insurance is another key area. With more businesses storing information online, the risk of data breaches and cyber attacks is growing. Cyber cover can help with the cost of repairs, legal fees, and fines if sensitive data is lost or stolen.

Other optional extras include:

– Tools or equipment cover

– Goods in transit cover

– Legal expenses insurance

– Directors’ and officers’ liability insurance

These may not be necessary for every business, but it’s worth considering them. Think about your risks and speak to your insurer about what options are available. Optional doesn’t mean unimportant—it just means it’s not included by default.

How to Avoid Costly Commercial Insurance Mistakes

Now that we’ve covered the most common mistakes, how can you avoid them? With a few simple steps, you can reduce your risks and ensure your insurance gives you the protection your business really needs.

Work with a Trusted Insurance Broker

A broker or adviser can help you navigate the complex world of commercial insurance. They understand the different policy options and can tailor cover to suit your needs.

They’ll also help you avoid common pitfalls like underinsurance or missed exclusions. If you ever need to make a claim, they’ll be there to support you through the process and make sure it goes smoothly.

It’s always worth working with someone who knows the market and can get you the right cover at a fair price.

Review Your Policy at Least Once a Year

Your business is always changing, so your insurance should change too. Review your policy every 12 months or sooner if something major changes—such as moving premises, taking on more staff, or buying expensive equipment.

Updating your insurer helps ensure that your policy is still fit for purpose. It also helps avoid rejected claims caused by out-of-date information.

Ask Questions and Read the Small Print

Don’t be afraid to ask your insurer or broker questions. If anything is unclear, ask for a clear explanation. You have the right to understand what you’re paying for and what’s expected of you.

Read your policy documents in full, including the exclusions and conditions. Know what’s covered, what’s not, and what steps you need to follow if you need to make a claim.

It’s better to spend a bit of time reading now than to face a nasty surprise later when something goes wrong.

In conclusion, commercial insurance is a vital part of running a safe and secure business. But mistakes in managing your cover can lead to serious problems. By staying informed, reviewing your policy regularly, and working with professionals, you can avoid the most common errors and protect your business from unexpected costs.