When starting out, many 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 potential risks.

That’s a reckless and 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, its 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 the you-know-what hits the fan – think about your existing insurance coverage and recognize the five ways you may have outgrown your policy:

business team

1. Your revenue has grown

If your small business is earning a lot more money (congratulations!), it can lead to more problems. After all, as your business and revenue grow, so too does your risk exposure. A significant increase in revenue means you’ll need a greater amount of coverage for things like commercial general liability insurance (which includes product liability coverage) and business interruption insurance (typically included in a commercial property policy). Think of it this way: if you’re manufacturing a higher number of products, chances are you have more customers purchasing those products. That, in turn, elevates your risk of third-party bodily injury and property damage allegations or lawsuits.

2. Changing your products or services

If it’s not because of customer growth alone, the COVID-19 pandemic may have encouraged you to expand, reduce, or change the products and services you offer. Or maybe you run a landscaping company, and the type of work you do is seasonal. So, to increase your revenue, you decide to offer snow removal services. Regardless, the changes you have made can change your risk exposure.

3. You’re moving to a new office

Your existing commercial property insurance policy 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.

4. You’re hiring 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 not sure), 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. You’re buying new equipment

A business that is thriving and growing likely 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 to replace or repair that equipment. That’s all the more reason to let your broker know if you’ve purchased new, expensive equipment.

What to Consider When Thinking About Your Insurance Needs

Business insurance is not a one-size-fits-all product. On the contrary, a business insurance policy should be tailored to reflect and provide coverage for your burgeoning entity’s unique needs. When you’re exploring your coverage options, keep these tips in mind:

  • Know your risks. Think about your business, the industry you’re in, 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 can make a significant difference in the premium you pay. For example, if you’re a delivery company or are a business with commercial vehicles, avoid having employees with poor driving records behind the wheel. Or install fire suppression and security systems at your office if they don’t exist to help lower the cost of a commercial property policy.
  • Prioritize protection over premium. Once you understand your risks and the type of insurance you need, it’s time to shop around. It’s smart to be budget-conscious, but don’t discount the importance of having adequate protection. Buying the cheapest possible 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. Speaking of shopping around for insurance, partnering with a licensed broker to serve as your trusted advisor is essential. 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. Think about what’s changed for your business over the previous 12 months and where you think things are going in the future. 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 want to explore your options, get a free quote from Zensurance, and speak to one of our friendly licensed brokers. We specialize in helping all kinds of Canadian small business owners, startups, sole proprietors, independent contractors and professionals, and entrepreneurs get the business insurance coverage they need.

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