Did you know that 75% of small businesses are underinsured? Many entrepreneurs buy policies blindly—only to discover devastating gaps when disaster strikes. A single insurance mistake can cost you thousands in uncovered claims or even force you to close your doors.
After helping hundreds of business owners navigate insurance, I’ve identified the 5 most expensive mistakes—and exactly how to avoid them. Whether you’re buying your first policy or reviewing an existing one, this guide will save you money and headaches.
Mistake #1: Choosing the Cheapest Policy (Without Comparing Coverage)
The Problem:
Low premiums often mean:
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Sky-high deductibles ($10,000+ out of pocket per claim)
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Missing protections (no cyber coverage, low liability limits)
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Bad claims service (slow payouts or frequent denials)
The Fix:
✔ Get at least 3 quotes (use a broker for complex needs)
✔ Compare coverage details, not just prices
✔ Check AM Best ratings (stick with A- or higher insurers)
Real Example: A restaurant saved $500/year on premiums but later faced a $45,000 flood claim denial—their “budget” policy excluded water damage.
Mistake #2: Underestimating Your Risks
The Problem:
Business owners often overlook:
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Cyber threats (even small businesses get hacked)
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Contractual liabilities (client agreements may require specific coverage)
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Inflation impacts (2025 repair costs are 20%+ higher than 2020)
The Fix:
✔ Conduct a yearly risk assessment (ask: “What could ruin us?”)
✔ Review client contracts for insurance requirements
✔ Add inflation guard clauses to policies
Critical Coverage Often Missed:
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Employment practices liability (for wrongful termination suits)
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Equipment breakdown insurance (for expensive machinery)
Mistake #3: Not Reading the Exclusions
Shocking Policy Gaps:
Many “comprehensive” policies exclude:
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Flood/earthquake damage
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Professional errors (needs separate E&O insurance)
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Claims from past work (occurrence vs. claims-made policies differ)
The Fix:
✔ Demand the full policy wording (not just the summary)
✔ Highlight all “exclusions” and “endorsements”
✔ Ask your broker: “What’s the #1 claim my industry faces that this doesn’t cover?”
Pro Tip: If excluded risks are critical (e.g., floods), buy separate policies.
Mistake #4: Forgetting to Update Your Policy
Common Triggers for Updates:
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Hiring employees → Requires workers’ comp
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Buying new equipment → Adjust property coverage
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Offering new services → May need professional liability
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Moving locations → Changes property risks
The Fix:
✔ Set bi-annual insurance reviews (put them in your calendar)
✔ Notify your insurer within 30 days of major changes
✔ Keep an updated asset inventory (video walkthroughs help)
Stat: Businesses that regularly update policies file 42% fewer disputed claims.
Mistake #5: Handling Complex Claims Alone
The Problem:
Insurers may:
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Lowball settlement offers
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Delay payments for “investigations”
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Deny valid claims over technicalities
The Fix:
✔ Document everything (photos, emails, receipts)
✔ Consider a public adjuster for large claims (>$50K)
✔ Know your state’s insurance commissioner complaint process
Claim Hack: Start a claim immediately—even if damage seems minor. Waiting can void coverage.
Bonus: 3 Quick Ways to Save Without Sacrificing Protection
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Bundle policies (BOPs save 15–25% over separate plans)
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Increase deductibles (If you have cash reserves)
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Ask about discounts (Security systems, claim-free history)
Final Thoughts: Better Safe Than Sued
Business insurance isn’t sexy—until you need it. These mistakes cost companies $50,000+ on average when disasters hit.
Your Action Plan:
1️⃣ Audit your current policy this week
2️⃣ Schedule quotes with 2–3 insurers
3️⃣ Share this guide with another business owner
For more money-saving tips, visit Akolay Book News.