3 Hidden Business Insurance Risks (and How to Avoid Them)

1. Don’t Shop for Business Insurance Like You Do for Car Insurance

When it comes to business insurance, shopping around for quotes can backfire. Unlike car insurance, where multiple agents can give you competing prices, business insurance operates differently. Here’s the catch:

• What Happens: The first agent to approach an insurance company gets exclusive rights to quote with them. This is called “market blocking,” and it means other agents can’t get you a quote from that same company.
• The Risk: If the first agent doesn’t specialize in your industry or prioritize your quote, you could miss out on the best coverage.
• Example: Imagine you ask three agents for quotes. One locks in a great company but takes forever to get back to you, and now the other two agents can’t offer you that option. You’re stuck waiting or settling for less-than-ideal coverage.
• What to Do Instead: Work with one agent who knows your industry. They’ll understand your risks and have the right connections to find the best coverage.
• Why It Matters: This approach saves you time and hassle while ensuring your business is fully protected.

2. Outdated Insurance Can Leave You Exposed

Just because you have a policy doesn’t mean you’re covered. Businesses grow, pivot, and change, and your insurance needs to keep up.

• The Risk: A policy you bought years ago may not account for new products, services, or operations, leaving gaps that could cost you during a claim.
• Example: Say you started as a small coffee shop but recently added catering services. If your insurance doesn’t include off-site operations, an injury at a catering event might not be covered.
• What to Do Instead: Schedule an annual insurance check-up with an agent who knows your business. They’ll help update your policy to reflect what’s happening now, not what was happening years ago.
• Why It Matters: Staying on top of your coverage means you won’t be blindsided by uncovered risks when you need it most.

3. Employees Create New Risks You Can’t Ignore

Hiring employees is a big step for any business, but it also comes with added responsibilities and risks.

• The Risk: Most business owners know about Employment Practices Liability Insurance (EPLI) to cover lawsuits like wrongful termination or discrimination. But what about claims that name you personally, like accusations of defamation? Without Directors & Officers (D&O) insurance, you could be paying legal bills out of your own pocket.
• Example: A manager is sued for making a negative comment during a termination meeting. Without D&O insurance, they’re stuck covering their own defense costs.
• What to Do Instead: Talk to your agent about filling coverage gaps with D&O and fiduciary liability insurance (if you offer benefits like a 401(k)).
• Why It Matters: These policies protect your personal and business assets, so one lawsuit doesn’t derail everything you’ve built.