How old is the insurance policy on your business? My guess is… you have an outdated insurance policy!
As your business has grown, you’ve likely taken on many more employees, assets, and liabilities.
If you’ve kept the same policy for several years, you’re likely operating without some of today’s essential insurance products.
Here’s a rundown of some of the most common scenarios that leave many businesses vulnerable, and why the simple act of planning regular reviews of your outdated insurance policies can offer enormous protection in the long run.
The 7 Reasons You May Have An Outdated Insurance
1. You’ve Implemented New Technologies
As your business becomes more reliant on technology, you take on new risks.
Every fresh convenience may come with a new, hidden liability. Most businesses today have moved many of their operations to the cloud.
Many are responsible for storing sensitive customer data, and many more are at risk of a complete interruption to their business if their technology experiences downtime.
As cyberattacks and data breaches continue to increase, cyber/data liability insurance is now an essential part of any business continuity plan: it offers practical support in the event of a breach, compensation from loss of income or reputation damage, coverage for regulatory penalties, and much more.
In today’s always-on digital world, it’s not a nice-to-have, but a must.
2. You’re A Professional Services Provider with Only General Coverage
Your general liability policy doesn’t cover you against legal claims by irate clients or customers, whether their complaints are real or imaginary.
Professional liability insurance, also known as errors & omissions insurance, protects you from the immense financial burden that even a small, unfounded lawsuit can create.
With a good E&O policy, you won’t be left strapped after either a serious or frivolous lawsuit relating to negligence or other problems with your services.
This applies to countless professional service providers—everyone from lawyers, accountants, consultants, notaries, real estate agents (and, yes, insurance agents!) to hair salons and technology providers.
3. You’re Not Being Strategic About Your Employment-Related Liabilities
Employing people is inherently risky.
In today’s litigious corporate climate, lawsuits relating to workplace harassment, discrimination, and wrongful determination are on the rise, as are the associated costs.
Researchers have found that companies based in the U.S. have at least a 1-in-10 chance of having an employment-related charge filed against them.
Employment practices liability insurance (EPLI) protects you from the costs of defending employment claims. Some general liability policies may include low-level EPLI coverage as part of a bundle—say, $100,000 per claim—but most companies would be well advised to carry a much higher limit.
The punitive damages awarded in successful employment cases can easily reach millions of dollars. Whatever coverage you choose to carry, it’s a decision that should be made strategically, after considering your business’s risk factors.
4. Death by a Thousand Cuts: You’re Not Factoring in the Small, Incremental Changes
With an outdated insurance policy, you may end up with a number of small gaps in coverage.
Or you may be paying for coverage you no longer need! In either case, you may experience a snowball effect: small gaps and wasted coverage can add up to huge costs.
The dollars really are in the details, and another advantage of reviewing your policy regularly is that it ensures that every resource is being used efficiently.
5. Past Mistakes in Your Policy Are Going Unnoticed, Year After Year
Human error: it happens, and it can have an outsized effect. Like the “death by a thousand cuts” problem, small, seemingly innocuous mistakes and oversights in your old policy can add up to real, costly vulnerabilities.
This is another case where regular review will maximize the opportunities to catch expensive errors.
6. You’ve Expanded to Multiple Locations
If your one-stop shop has grown into a multi-site operation, take the time to analyze the unique elements of each location.
Requirements vary by state, so it’s important to know all the laws you’re subject to, especially if you’ve expanded your business across state lines.
It’s common for each location to have its own set of policies, even when the function and risk profiles are the same, but you may be able to have one comprehensive policy that covers each.
You should work closely with a qualified agent who will take the time to dive deep and design you a custom policy.
7. Your Insurance Isn’t in Step with Recent Regulatory Updates
One of the best things you can do to protect your business and save money in the long term is to emphasize annual reviews of your insurance coverage.
Non-compliance is costly, and unfortunately, many businesses find that out the hard way. Every industry is in flux, so it’s crucial to stay on top of new regulations.
When you make a point to implement yearly reviews of your insurance coverage, you will make sure you are continually factoring in new guidelines and staying ahead of the curve.
Wrapping Up… What To Do If I Have An Outdate Insurance?
Every successful business owner keeps a careful eye on the bottom line. As we’ve seen, frequent insurance reviews aren’t always about adding coverage—they’re also the best way to discover new ways to cut costs, find better rates, and get the exact insurance you need—no more, no less.
You should always consider talking to a professional insurance broker as well so they can keep you updated on all the news on what to change or not.
Opinions expressed in this article are solely the author’s opinion, not intended to provide the reader with legal or any other professional advice. Should you need advice or opinion, consult with a qualified professional to address your specific needs.