Businesses around the world need to buy commercial insurance in order to protect themselves against the possibility of loss and liability, in case of an accident or other mishaps. This holds true for all types of businesses in the United States as well.
So, whether you own or manage a small business or a large corporation, it is very likely that you will have to purchase a commercial insurance policy sooner or later. Usually, all businesses have at least one insurance policy, which helps secure the building out of which the business operates, whether it is owned or leased by the organization.
Any other type of commercial property used by the business, such as warehouses or regional offices, must also be insured. However, businesses that are new to buying commercial insurance policies often make certain common mistakes, that can prove to be very expensive in the long run.
Avoiding these mistakes is crucial for the long-term success of your business as well as the safety of your investment. This is because buying the wrong insurance policy or choosing insufficient coverage could end up costing you an exorbitant amount of money in the long run.
With the right knowledge and information, you can keep yourself from committing any of these errors. Read on to know what they are.
4 Mistakes to Avoid While Buying Commercial Insurance
1. Only Buying Coverage for the Building
Buying insurance coverage for the building from which your business operates is of course very important. However, it is not just the building itself that you should insure, but also the income that it generates. For instance, if you rent out a part of your office building to another company, and an accident causes that section of the building to become unusable, then you will lose quite a bit of rental income while the renovation and repairs are underway.
Similarly, if you are forced to take downtime due to an accident in your own workspace, then that too will cause a fall in your income. Hence, you should buy an insurance policy that will compensate you for the loss of income as well as for the physical damage to your property.
2. Buying Insufficient Coverage
Another common mistake small or new businesses make is buying insufficient insurance. This can be because they want to save money on premiums or because they don’t think they need a particular type of insurance policy. Sometimes, this can be the right decision. For instance, it wouldn’t make much sense for you to buy flood insurance if the business is located in a dry region that has not had a flood in decades.
However, this decision should always be made after you have undertaken thorough research, to ensure that you do not spend money on an insurance policy that does not cover an important area of potential liability. For instance, if your factories require open flames or heavy electrical usage, you should definitely make sure that you are insured against the possibility of a fire breaking out in the building.
3. Prioritizing Low Premiums
You should also be careful not to choose an insurance policy based simply on the number of premiums you would have to pay. You may think you’re saving money by paying low premiums, but if an accident were to occur, you could end up losing a significant amount of money instead.
This is because an insurance provider will never charge you premiums that are below market rate. Hence, if the premiums appear to be exceptionally low, it can be due to one of two reasons. Either the insurance company isn’t a reputed and trusted organization, and so needs to charge below-market rates to get clients.
Or your insurance policy is missing certain crucial elements or coverages. In either case, buying such a policy from a company that is not trustworthy may result in difficulties in the long run, and you may end up having to pay out of pocket for any repairs needed.
4. Not Having Sufficient Information
Before buying the commercial insurance policy, you must carefully read the fine print to understand exactly what the contract entails. Does your insurance policy include a wide variety of coverage? Does it cover third party liability, theft, fraud, accidents, etc? You should ideally seek advice from your lawyers and other stakeholders to get a good sense of exactly what kind of coverage you are likely to need.
Then, you should ensure that the policy you are buying offers everything you need, and is within your budget. You should also look into the deductibles, compare different quotes, and check the track record of the company from whom you plan to purchase the policy, for the best results. Moreover, you should ensure that your deductibles are neither too high, nor too low so that you can have the ideal balance of affordable premiums and sufficient coverage.
When it comes to purchasing a commercial insurance policy, the market is full of seemingly attractive options, and the choice can often seem quite confusing. Hence, you should consult a trusted insurance agent, do your own research, and talk to a lawyer in order to make an informed and beneficial decision.