As your business grows, don’t make this critical business insurance blunder.
Why did you buy business insurance to begin with? Let’s hope it’s not just because the bank, a landlord, or some other entity requires you to have it. It’s because you know you need to protect the assets and employees of your business as well as yourself. In the event of an incident that is or may be claimed to be the fault of someone or something in the business, your business insurance coverage is there to protect you and the company.
You realize how necessary it is to protect the property and assets of the business in the event of a disaster such as a fire, but is the coverage enough today?
Today in this challenged economy, it is still possible for a business to grow and thrive. One problem we often see in reviewing coverage for new clients is that the risk that was initially covered has been allowed to be exposed again, as well as other risks are now possible.
Typically, a start business puts coverage into place which is affordable, and offers coverage which will protect a start up business. Often, what happens is that as the business grows the coverage in place remains stagnant. That can open up or allow exposure to risk to grow as the business does. Let’s look at a real life scenario to see how that can happen.
Let’s use a local café as an example. Initially, when it opened, the owner put business liability coverage in place. He also purchased property insurance for the business as well as having worker’s compensation to cover several part time employees. Overall, they did a pretty good job of purchasing business insurance which offered a good value and an affordable premium. Two years later, let’s look at the café in more detail.
Business has exceeded plan both years. They started doing some local deliveries and the owner has his employees use his personal car. He’s added a new walk-in cooler and expanded by taking over the space next to him as well as adding liquor service. He’s had to hire 7 more people and 3 of his folks have gone to full time as he also expanded his hours of operation to Saturday and Sundays as well as offering dinner. Business is so good he’s added a new computer system, website, and even taken a pay increase for himself.
The problem is he never discussed any of this with his licensed insurance professional. He is unaware the huge risk of using his personal auto and letting employees operate it. He hasn’t increased the liability coverage or liquor liability to cover his growing business. He hasn’t increased the limits on his property insurance and looked at adding business interruption insurance and mechanical breakdown insurance. He needs to look at certain types of disaster insurance as the business continues to grow and risk grows with it.
In other words, by not growing the coverage with the business growth, this business has assumed some huge risk. Potentially enough to cause fatal financial harm to the business should an incident occur. Don’t put your business in the potential peril. Keep your business insurance agent apprised of changes and make sure to schedule annual reviews.