The Importance of Keeping Your Small Business Insurance Up to Date

A bakery owner waiting for customers in his shop. A bakery owner waiting for customers in his shop.

Business Insurance: Many business owners today don’t think about it once their policy has been issued. But that may be a critical mistake.

One lawsuit has the potential to shut down a business before it even has a chance to succeed. It’s far easier to ensure that your small business is properly insured from the beginning, than risk taking a hit.

Your business may change over time which means your insurance needs may also change. That’s why your business insurance plan requires a regular checkup. But when should you update your business insurance coverage?

In most cases, if nothing changes, a once-a-year review may be adequate. However, there are events that should trigger you to schedule a review of your coverage plan with your insurance broker sooner.

There are many events that can signal it’s time to revisit your small business insurance, such as:

  • The expansion or contraction of product lines or services.
  • The purchase, addition, or elimination of equipment.
  • The opening of more locations, move to a new one or shutting of a location.
  • Changes to your workforce, such as the addition of new or temporary employees, seasonal help, sub-contractors, or a downsizing of workforce.
  • Your business expansion to digital storefront, eCommerce, and mobile payment capabilities.

As your business and risk exposures change, so should your insurance coverage. You may need more coverage, you may need less, you may need different kinds of coverage, depending on what is different in your business.

Types of Business Insurance

If you’re unsure what coverages your business needs now, it may be helpful to review the common types of business insurance:

  • General Liability: Helps protect your business from the cost of claims for damages because of bodily injury, property damage, personal injury like slander or libel, and advertising injury.
  • Business Owner’s Policy: Combines property and liability insurance to help provide small businesses with general coverage in a convenient and cost-effective way.
  • Professional Liability: Helps cover professionals and businesses for claims of negligence, bad advice, poor representation and more.
  • Umbrella: Provides an additional layer of liability coverage when losses exceed the limits of your business’s primary policies.

How Being Underinsured Hurts Your Business

Being underinsured may result in unnecessary disruption to – or even bankrupt – a business that has suffered a loss. Many factors can result in financially impairing a business. Consider these facts:

  • Severe Weather: Unprecedented frequency and severity continue to drive catastrophic losses. There was an estimated $140 billion in estimated global insured losses from natural catastrophic events in 2022.2 For small businesses, severe weather can wipe out inventory, records, equipment – essentially, devastating the business.
  • Cyber Attacks: According to a Travelers study, cyber risks remain a top overall business concern. Cyberattacks can force a small company to close for a long time or even permanently.
  • Increased Costs: Led by the cost of structural steel and the price of lumber, construction costs have jumped over the past three years: Nonresidential construction cost is up 11.1% and multifamily residential construction cost is up 15.4%.3

… to name a few.

Remember, should your business suffer a major loss, having the right insurance in place means your business may be up and running more quickly than it would if you were underinsured. So, when your business changes, know that your risk exposures may too. You’ll want to be sure your coverage is appropriate. Travelers can help you understand the implications that changes in your business may have on your business insurance plan, and your options for adjusting coverage.

To learn more or schedule a review of your coverage, contact your broker or Travelers representative today.

Sources
1 https://www.travelers.com/travelers-institute/webinar-series/symposia-series/small-business-playbook
2 https://www.reinsurancene.ws/global-insured-losses-from-natural-catastrophes-in-2022-seen-at-140bn-by-gallagher-re
3 https://www150.statcan.gc.ca/n1/daily-quotidien/230208/dq230208d-eng.htm