3 Insurance Mistakes Startups Can't Afford to Make

Running your own show comes with its fair share of to do’s, but one thing founders really shouldn't overlook is business insurance.  As with any other type of insurance, it’s something you hope to never need, but will be grateful you have it should the need arise.  Let’s break down 3 common errors small business owners make with insurance, so you can steer clear of them.

Mistake #1: Thinking You Don't Need Insurance - You Do

One of the most common errors small business owners make is underestimating the importance of insurance. Whether you run a brick-and-mortar store or an online venture, insurance is not an expense to ignore. Numerous scenarios can arise where having the right insurance coverage can be a lifesaver.

First and foremost, customers, landlords, investors, or lenders might require you to have certain types of insurance as part of a contractual obligation. Neglecting these requirements could jeopardize your relationships and leave you vulnerable to unforeseen financial burden.

Furthermore, mistakes happen, even to the most conscientious entrepreneurs. Even if you believe you're running a flawless ship, consider the potential consequences of not having insurance in place. From customer complaints to employee disputes, any of these situations could escalate into a costly lawsuit that threatens your company’s survival.  Professional liability insurance protects against this.

Plus, let's talk about cyber attacks. Your business, no matter how small, holds valuable data and assets that hackers might want.  Since small businesses aren’t known for their top-notch cybersecurity (you’ve got a lot on your plate!), you are considered an easy target.  Given the interconnected nature of business relationships, your vulnerability could extend beyond your immediate operations and impact your partners or other companies.  And all of this risk could be addressed with cyber insurance.

Mistake #2: Not Getting Multiple Quotes

Getting business insurance is not a one-size-fits-all endeavor. Just like no two businesses are identical, insurance policies can vary significantly in terms of coverage and cost. This leads us to the second mistake to avoid: not obtaining multiple quotes.

Getting several quotes from different insurers is akin to shopping around for the best deal. Not all insurance policy forms are the same, meaning they don’t offer identical coverage. Depending on your business's operations and risks, some policy forms might be inadequate, leaving you exposed to unforeseen liabilities.  So, obtaining multiple quotes can teach you a lot about what is offered and what is a fair price.  

This is because each insurance company has its own risk tolerance, or “appetite,” which is reflected in their pricing. (This process is akin to how airlines adjust their fares based on various supply and demand factors like time of day, how full a flight is, etc.)  By gathering quotes from multiple insurers, you can identify the sweet spot where their coverage and your budget align

Mistake #3: Not Working with an Expert

When navigating the complex landscape of business insurance, guidance from an expert can be the difference between adequate protection and unnecessary exposure. Not to mention it can save you time.  Yet, we still see many small business owners make the third mistake: not working with an insurance expert.

Just as you wouldn't draft your own legal contracts, tackling insurance on your own can be equally risky. Insurance agents are your allies – they work on your behalf, not the insurer's, to ensure you get the coverage that suits your specific needs. You need only complete one application, and these experts will approach multiple carriers, review policies and pricing, and ultimately help you secure the right coverage at the best price.

Sure, insurance agents earn a commission (typically around 10%) on the policy you purchase. However, this fee pales in comparison to the peace of mind they provide. Their knowledge and expertise can save you from buying coverage you don’t need or missing an exposure your business is uniquely at risk for.

Now that you know three common mistakes, you can avoid making them. Recognizing that insurance is a necessity, requesting multiple quotes, and enlisting the help of an expert are the cornerstones of a solid insurance strategy.   

If you need advice on what insurance you need or help getting covered, the agents at eSpecialty Insurance are here to help.  We specialize in helping small businesses get coverage, and we’re the experts, so you don’t have to be!