Small Business Big World Episode 23: Big Insurance Mistakes Small Business Owners Make
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When it comes to protecting your small business, commercial insurance is more than just a safety net—it’s a critical part of your business’s stability and future success. In a recent episode of “Small Business, Big World,” we had the pleasure of sitting down with Derek Stevenson from Varney Insurance to dive deep into the types of coverage every small business owner should consider and certain pitfalls that they face. If you’ve ever wondered how to truly secure your business against unforeseen setbacks, this episode is for you.
The Must-Have Coverage: General Liability Insurance
One of the most fundamental types of insurance discussed was general liability insurance. Derek highlighted this as a non-negotiable for any small business. This coverage protects you from common liabilities, like slip-and-fall accidents, that can otherwise lead to costly lawsuits. Derek shared a particularly eye-opening story of two individuals who, after breaking into a retail shop, got injured and subsequently filed a lawsuit against the business. This scenario underscores the unpredictable nature of liabilities, making general liability insurance indispensable for any business owner.
Protecting Your Assets: Property Insurance
Another key point Derek emphasized was the importance of property insurance. Whether it’s your building, equipment, or inventory, property insurance is crucial for covering damage or theft. This type of coverage ensures that your business assets are protected, giving you peace of mind that your investments are safe no matter what happens.
Workers’ Compensation: A Legal Necessity
For businesses with employees, workers’ compensation isn’t just advisable—it’s a legal requirement in many states. This coverage protects both you and your employees in the event of work-related injuries. Derek explained how crucial workers’ compensation is as part of your overall insurance portfolio, ensuring that you comply with the law and safeguard your employees’ well-being.
Employee Practices Liability Insurance (EPLI)
In today’s litigious environment, Employee Practices Liability Insurance (EPLI) is becoming increasingly important. This type of insurance covers claims related to employment practices, such as discrimination, harassment, and wrongful termination. Derek emphasized that understanding the nuances of EPLI, including the need for both first and third-party coverage, is vital. This ensures that you’re protected not only against claims from employees but also from job applicants and other third parties.
Avoiding Gaps
One of the biggest small business insurance mistakes Derek highlighted is overlooking policy exclusions. Many business owners don’t realize that standard property insurance policies often exclude coverage for things like floods, environmental liabilities, and terrorism. In the current hard insurance market, underwriters are becoming stricter, making it more important than ever to scrutinize these exclusions. Understanding and pushing back against unreasonable demands can save your business from significant vulnerabilities.
Contract Insurance Requirements
Navigating contract insurance requirements can be a daunting task for small business owners. Derek advised that many business owners, especially subcontractors, tend to focus on the financial aspects of contracts while overlooking the insurance section. For instance, some general contractors may require subcontractors to carry a $5 million umbrella policy—a significant expense. Understanding and negotiating these terms can help you avoid taking on unnecessary risks and ensure you’re adequately protected.
How Social Media and Cybersecurity Impact Your Coverage
As our world becomes increasingly digital, the impact on insurance underwriting and risk assessment is profound. Derek shared a cautionary tale about a motorcycle repair shop that posted videos of employees performing stunts on company premises. This kind of social media activity led to increased scrutiny and could have jeopardized their coverage. The lesson here? Be mindful of what you post online, as it can have real-world implications for your insurance.
Cybersecurity is another area that small business owners cannot afford to ignore. With the rise in cyber threats, robust cybersecurity measures are essential. Derek explained that multi-factor authentication (MFA) is now a baseline requirement for obtaining cyber insurance. Additionally, regular cyber risk assessments and compliance audits are crucial for identifying vulnerabilities and ensuring you have the right coverage in place.
Conclusion
Securing your small business with essential insurance coverage involves more than just ticking boxes—it’s about understanding the types of coverage you need, scrutinizing policy exclusions, navigating contract requirements, and staying ahead of cyber threats. Derek Stevenson from Varney Insurance provided invaluable insights in this episode that every small business owner should consider. By taking these proactive steps, you can safeguard your business against a wide range of risks and ensure its long-term success.
Thank you for tuning in to this episode of “Small Business, Big World.” We hope this guide to commercial insurance has been both informative and actionable. To learn more and dive deeper into these topics, be sure to listen to the full episode. At Paper Trails, we’re committed to helping small businesses navigate their fears and headaches when it comes to payroll, HR, and small business management. Stay informed, stay protected, and secure your business’s future.
This podcast is a production of Paper Trails. We are a payroll and HR company based in Kennebunk, Maine, and we serve small and mid-sized businesses across New England and the country. If you found this podcast helpful, don’t forget to follow us at at Paper Trails Payroll across all social media platforms and check us out at papertrails.com for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, Paper Trails does not imply endorsement of or opposition to any specific individual, organization, product or service.