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When starting a business, one key factor to consider is what type of insurance caters to the specific needs of your business or industry. In many cases, you might even need multiple policies. And with a wide selection of insurance policies available, business owners may find it challenging to buy the right coverage for their operations.
To help with the selection process, here are four of the most common insurance mistakes businesses make you should avoid when buying insurance.
1. Assuming Your Home Is Covered
Many business owners who operate out of their homes think that homeowner’s insurance covers their business as well. But homeowner’s insurance provides coverage for the home — if you have a home-based company, you still need a business policy that covers structures, equipment, and other items used for business purposes. Here are a few types of coverage to consider:
- Commercial Property Insurance: Applies to both home and business use
- Premises Liability Insurance: Covers injuries within the home-based office
- Error and Omission Liability Insurance: Coverage for mistakes when offering professional services
- General Liability Insurance: Provides wider coverage
2. Forgetting Workers Compensation Coverage
Workers Compensation is required by law in most states. But even if state regulations don't require this coverage, it is still advisable to get it so you can protect your workers and secure the business against work-related injuries and medical costs.
What if a business doesn’t have employees? There are instances where founders should consider buying a policy anyway. Aside from the fact that it may be required by the state, business owners should carry this coverage if they use contractors or leased workers. Independent contractors also may need to buy this policy if the jobs they secure will require it.
3. Getting Over Insured
It’s essential to buy comprehensive coverage for your business, but buying insurance products that don't meet your needs is just a waste of money. An insurance agent can help identify the specific needs of your business so you get exactly what you need. Consider using an insurance checklist to assess your risks and determine the types of business insurance needed. Also, every business owner needs to read and understand the fine print of their policy — and ask questions to ensure your company is protected.
4. Failing to Update Policies Regularly
As the company grows, many businesses fail to check and update their insurance. What used to be comprehensive may not be enough to cover the needs of your business any longer. Make sure to review your policies every quarter, and keep a list of any changes such as hiring more employees and buying additional equipment and vehicles. If coverage limits should be updated or new coverage is needed, make these changes as soon as possible to keep your business protected.
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