Ten Most Grievous Insurance Offenses Committed By Business Owners

Your business insurance is an asset just like your equipment or inventory. To use it to its full advantage, you have to learn to avoid these common mistakes:

1.   Business insurance is only necessary if you have assets to protect – Asset protection is only one reason to purchase insurance. Insurance policies also pay for the legal defense of covered losses. As the defendant in a lawsuit, you will find yourself with a hefty price tag for court costs whether you are innocent or guilty. Without insurance, those costs will be an out-of-pocket expense.

2.   Sole proprietors and S-corporation owners don’t need workers’ compensation insurance – Small business owners are typically classified as clerical or salespeople and workers’ compensation rates for these classes are minimal. In return for your premium, you get 60 percent of your salary, tax-free should you need to file a claim. Workers’ compensation also pays medical bills that may not be covered under your health insurance and there are no deductibles or co-pays.

3.   When buying insurance, you should always opt for the higher deductible – Never choose a deductible until you have first reviewed the savings associated with each deductible level and compared that with your final out-of-pocket payment difference. Don’t forget to factor in the level of risk you are comfortable with before making your final decision.

4.   It isn’t necessary to see a sub-contractor’s certificate of insurance – Operating on faith may work in some situations, but this isn’t one of them. If you fail to get a copy of insurance certification before work starts, you could end up paying more for your workers’ compensation after you are audited, even if no claim was filed. If a claim is filed, and the subcontractor is uninsured, your premiums will increase.

5.   Vehicles leased in the corporate name cannot be insured under your personal auto insurance policy – Since you don’t have legal title to the vehicle, it isn’t yours personally, so it cannot be insured under your personal auto insurance.

6.   Thinking your coverage is cast in stone – Insurance can only protect assets if they are added to the coverage. As you add inventory or equipment, you should update your policy to reflect those changes.

7.   Leaving your insurance agent clueless as to changes in your company – The time to tell your insurance agent that you are changing organizational structure, adding a new product line, or leasing a vehicle is before you start. Your agent can determine if the anticipated move will be costly in terms of the additional insurance you will need to cover new risks. Furthermore, they may be able to suggest an alternate course of action.

8.   My insurance agent doesn’t need to review leases before I sign them – Your agent can help you determine if the lease requires you to insure something over which you have no control, no insurable interest or which may cost you a lot to insure.

9.   Home-based business owners don’t need to consider business insurance – As the owner of a small business, you need the guidance of a business insurance agent who can discuss with you the specialized coverages you need. 

10.  You don’t ask your insurer for loss prevention resources – Insurance companies are loss prevention specialists. If you don’t take advantage of their knowledge, you’re ignoring a valuable resource.

About Brian Hendricks

Brian Hendricks is the President of Fidelity Insurance Group. Brian started Fidelity in 2003 with 0 clients. Today Fidelity Insurance Group is a Premier Independent Insurance Agency in Florida with over 3,000 families and businesses insured. Brian currently serves on advisory boards for 2 of the largest property insurance companies in Florida. Knowlege, Integrity, and Committment are his and his agency's guiding principles.
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