1. You haven’t made it a priority as a small business
Small business owners sometimes figure they don’t need to carry much insurance because they don’t have a lot of assets. But someone who sues you doesn’t necessarily care how much money you have. They may, unfortunately, intend to destroy you financially. And the smaller a business is, the more likely it is that an owner or manager can be held personally liable. So in a way, small businesses are at a much higher risk than big enterprises, because one lawsuit can be devastating.
Never been sued? You’re lucky. The Small Business Administration estimates that 36 to 53 percent of all businesses will be involved in litigation in any given year. For many of those, a business insurance policy will cover the costs of settlements, judgments, and legal fees. Unfortunately, some companies will discover their coverage is lacking. Here are some indicators that your business may be underinsured..
2. You’re in the business of advice
Anyone who gives advice for a living is at risk of misunderstandings, client dissatisfaction, and simple human error. Advice-giving professions are not limited to fields like counseling and financial planning. Here’s just a short list of professions that also give advice: tax preparers, home inspectors, building contractors, wedding planners, professional organizers, life coaches, sales trainers, and motivational speakers.
3. You have employee turnover
Even your most trusted employee can make a mistake that costs your company thousands of dollars. So if you have high turnover, there’s even more exposure to risk. A government study of small business lawsuits found that after a suit, business owners primarily wished they had trusted their employees less, purchased insurance, and made sure every employee was bonded.
4. You only have one kind of insurance
There are many types of business insurance. General liability and business owner’s policies (BOPs) are some of the most basic, but if that’s all you have, it can be a sign that you are not fully insured. Review other types of insurance, like: property, commercial auto, worker’s compensation, errors and omissions (E&O), directors’ and officers’ (D&O), cyber liability, employment practices, business interruption, and umbrella policies which supplement existing policies against catastrophic loss.
5. It’s a high-risk business
It might not feel like your business falls into the typical high-risk categories, like doctors, lawyers, online gambling, and adult-oriented services. But there are dozens of other fields that come with high risk. Software developers, for example, can accidentally cause millions of dollars in lost revenue due to glitches. Sometimes there is risk simply because the business deals with highly emotional situations, as funeral directors do. Your insurance company can do a risk assessment that clarifies your situation and highlights areas that might need coverage.
6. You haven’t reviewed your policy lately
If you’ve been renewing the same policy for years, and can’t recall exactly what it covers, it’s time to take a fresh look. Tech issues have created new risks. For example, if your employees handle credit card information, or deal with a large amount of customer data, it might be time to look into cyber liability and data breach coverage.
7. You’ve never been sued or made a claim
Although it’s counterintuitive, if you’ve never been sued or made an insurance claim, it might be an indicator that you’re underinsured. Why? Because lawsuits and disasters force companies to review and update insurance policies. One study found that 94 percent of business owners assumed they were fully covered in the event of a disaster, but just 56 percent actually were.
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