Many new small business owners or entrepreneurs may underestimate the value of their assets or lack the right types of business insurance coverage they need. And year-over-year, they may also blindly renew the first policy they bought without fully appreciating the risks they face and how a changing, growing business can up those risks.

That’s a potentially dangerous way to operate. Ask yourself: what would you do if something goes wrong and you’re sued or if severe weather wipes out your place of business, inventory, and equipment, and you don’t have the insurance coverage to pay for those damages? Shudder to think. Such a scenario could expose you, your family, and your employees to financial hardship. Or worse, it could spell the end of your business by forcing you into bankruptcy.

But you can do something about it before tragedy strikes – think about your existing insurance coverage and recognize the ways you may have outgrown your policy:

A businesswoman contemplating

1. You have new products or services

The COVID-19 pandemic may have encouraged you to expand, reduce, or change the products and services you offer. Those new products and services may change your risk exposure and require you to boost your product liability insurance. It’s worthwhile to talk to a licensed broker about it.

2. You need to carry more inventory to accommodate a peak season

With a peak season comes more stock on hand to handle the demand. If your business suddenly needs to carry more inventory for a few months of the year, you should have a peak season endorsement or adjustments made to the limits of insurance you carry during those seasonal fluctuations.

3. You’re moving to a new office or renovating your commercial space

Your existing commercial property insurance is tied to your office. So, if you move to a new location or expand to more offices, your policy needs to reflect that. One of the factors insurance companies consider when calculating your business insurance policy is the location of your office or workspace.

If you’re not moving to new digs but are improving your existing workplace through renovations, that too calls for updating your commercial property coverage to reflect the value of the improvements. For example, if you replace all the countertops, electrical fixtures, and flooring with more expensive and newer materials, you need to ensure your property coverage limit accounts for that expense.

4. You are hiring or have hired more employees

If your company is growing, chances are you’re hiring more employees. However, the more employees you have, the greater your risk is. Your current policy likely covers full-time employees (talk to your broker if you’re unsure), but is the amount of coverage you have suitable? 

If you have subcontractors, they’re unlikely to be covered by your policy, so ensure they have policies of their own since you can be named in a lawsuit if they are found liable for damages or wrongdoing. For instance, if you are a spa owner who rents a room to a massage therapist a few days each week, and they are sued for malpractice, as their employer, you and your business could be named in the lawsuit.

5. Your revenue is growing

Suppose your business is starting to flourish and you’re seeing an increase in foot traffic in your store or warehouse (congratulations!). As your customer base and revenue grow, so too does your risk exposure because it elevates your risk of third-party bodily injury and property damage allegations or lawsuits. A significant increase in revenue means you’ll need to up the amount of coverage for things like commercial general liability insurance and business interruption insurance.

6. Your online business is increasing, and you now have customers stateside

Whether you ramped up your business’s online presence in the wake of the pandemic or launched a new online venture selling goods and services via a third-party marketplace like Amazon or Etsy, you need to weigh how that affects your risk exposure. For instance, if you’re a retailer with a brick-and-mortar location and you’re now selling more frequently online, including offering curbside pickups, you may need to enhance your overall policy or your cyber liability protection to reflect that change. Also, if you’re finding your customer base has expanded to include Americans and you’re shipping goods stateside, your liability coverage needs to include the geographies you are serving.

7. You are travelling to customer locations, or employees are using their vehicles for business

Whether your company provides home delivery services to your customers or if your business requires employees to travel to customer locations using their vehicles or a company-owned vehicle, you need to think about adding commercial auto insurance to your policy. That’s because an individual’s car insurance coverage is not designed to account for any vehicle used for business purposes.

8. You’re buying new equipment

A thriving, growing business needs to acquire more equipment to keep operations running smoothly. Whether computing systems or heavy machinery, these are assets you need to protect, and they should be accounted for in your policy. You might need equipment breakdown insurance, for example, to pay for the cost of replacing or repairing that equipment.

What to Consider When Thinking About Your Insurance Needs

Your business insurance policy should be tailored to reflect and provide coverage for your unique needs. When you’re exploring your coverage options, keep these tips in mind: 

  • Know your risks. Think about your business, your industry, and the types of products or services you provide. Now think about all the ways things can go wrong without warning. Have a clear understanding of what your liability risks are.
  • Understand how to mitigate your risks. Proactively reducing the risks your business faces may decrease the premium you pay. For example, if you’re a delivery company or a business with commercial vehicles, avoid having employees with poor driving records behind the wheel.
  • Prioritize protection over premium. Once you understand your risks and the type of insurance you need, it’s time to shop around. It’s wise to be budget-conscious, but don’t discount the importance of having adequate protection. Buying the cheapest policy you can find might save you a few bucks, but if something goes awry and you have limited coverage, it can cost you a lot more. It may even be financially ruinous to your small business if, for example, you’re sued and don’t have the coverage you need to hire a lawyer or pay a court-ordered settlement.
  • Partner with a licensed broker. Partnering with a licensed broker to serve as your trusted advisor is essential when shopping around for insurance. A broker works for you, not an insurance company. They can help you assess the risks you face, answer questions, and find ways to get you an affordable policy that doesn’t leave you vulnerable.
  • Review your policy annually. Get into the habit of reading your policy thoroughly and reviewing it annually before renewing or buying a new one. An insurance policy is typically a one-year contract between you and your insurance provider. The more you understand your policy and its terms and exclusions, the less likely you will have gaps in your coverage or have a claim rejected if you need to file one.

If you’re considering switching insurance providers or exploring your options, fill out an online application to get a free quote from Zensurance. We specialize in helping all kinds of Canadian small business owners, startups, sole proprietors, independent contractors and professionals, and entrepreneurs understand what business insurance coverage they need. So let our team take the hassle of finding a policy off your hands. We’ll shop our network for more than 50 insurance companies to find the policy that suits you best at a price you can afford.

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About the Author: Matt Jardine

Matt Jardine is a licensed insurance broker and Team Lead, Property & Hospitality, at Zensurance.