There’s a lot of misinformation about business insurance. Allow us to set the record straight.
Learn the truth behind these common business insurance myths so you can set yourself up for success.
As a small business ourselves, the Harry Levine Insurance agency hates to see local businesses with the wrong insurance policies.
Whether it’s someone with unnecessary policies, too little coverage, or—worse still—no insurance at all, we can usually trace it down to one thing: misinformation.
Too many people have fallen prey to these business insurance myths for us not to address them. So we’ve gathered up the 10 most popular myths people believe about commercial insurance and debunked them, one at a time.
Myth #1: My business is too small to need insurance.
No one should ever assume that they don’t need insurance!
It isn’t about your revenue, the number of employees, or the square footage of your storefront. Your insurance policies should be based on your exposure to risk.
Risk comes in many forms. It can look like a fire that destroys your inventory. It can look like theft of the company car. It can look like a customer suing you over their experience with your product, service, or advice.
No one ever thinks it will happen to them. But something always does, sooner or later. The right insurance just makes sure it doesn’t bankrupt you.
Myth #2: Business insurance is too expensive.
Your business is worth protecting, isn’t it? If you’re focused only on price, you probably don’t see much value in your policies. Let us help teach you about that value.
Business insurance isn’t exactly free, but it’s well worth every penny. You might think you can’t afford commercial insurance, but you certainly can’t afford to pay for extensive repairs, renovations, or a lawsuit.
In fact, the smaller your business is, the more insurance can benefit you. Imagine what would happen to your business if the next big storm takes off your roof or a litigious customer claims your daily special gave her food poisoning.
Insurance is a safety net. And no one can predict how or when they will fall from their tightrope.
Myth #3: My home insurance is enough to protect my home-based business.
You might have started a home-based business for the sheer joy of working in your pajamas, but your insurance company considers your home and your business as two completely separate entities…because they are.
Although both home and business insurance can cover the same types of risks (liability, theft, damage, etc.), the premiums are calculated very differently. Businesses are open to a lot more risk than your private family dwelling, and the two types of insurance are designed very differently.
Filing a business claim through your home insurance policy can very often lead to some very unpleasant surprises by the way of limited or no coverage.
Whether you provide a service or a tangible product, it’s important to properly insure your home-based business with a separate business policy.
At the very least, ask your insurance agent whether an endorsement or rider on your Homeowners Policy will give you the coverage you need based on your risk.
Myth #4: General Liability Insurance covers everything.
This is one of the most persistent business insurance myths!
Most people see the word “general” and assume that they’re getting comprehensive protection against anything and everything that could befall their business. But General Liability Insurance only covers some of the risks that threaten your business.
Instead, you can think of General Liability as a basic level of coverage for the risks that you might pose to a third-party.
The “general” in this case refers to your liability, not to all possible risks. (There’s no such thing as a single policy that protects against everything.)
Myth #5: Personal Auto Insurance will cover cars for business use.
Your personal auto policy will cover claims that occurred during your commute or lunch break, but for accidents that happen in the course of your job (making deliveries, driving to a job site, etc.) you will need a Commercial Auto Insurance policy.
There are a few exceptions and gray areas, but for the most part, your personal auto insurance policy is NOT a replacement for proper commercial car insurance.
Myth #6: I don’t need property insurance if I don’t have a brick-and-mortar location.
In the insurance world, “property” is not the same as “real estate.” Rather, it refers to any tangible product that you own and any other physical object that you use to do your job. This does include things like offices, warehouses, and land, but it also includes equipment, vehicles, supplies, raw materials, and anything other physical object that you use to do your job.
“Property” merely means “possessions.”
And don’t just concern yourself with the monetary value of your property. Think about its replacement value and how necessary it is to your line of work.
Say you’re a handyman and your vehicle was stolen out of the driveway. That 1999 Ford F-150 might not have been worth much on Kelly Blue Book, but it will take a lot of time, energy, and money to replace it.
Myth #7: Malpractice insurance is only for doctors.
Unlike General Liability Insurance, which covers claims relating to physical damage or injury, E&O Insurance covers legal fees if you are sued based on negligence or harmful advice.
No one likes to think about their beloved clients filing a lawsuit against them, but situations like this happen all the time.
You forget to install spyware while refurbishing a client’s laptop and they get hacked. You miscalculate a decimal point while doing a client’s taxes and they get audited. Your hand slips while replacing a carburetor and what should have been a simple fix turns into a $12,000 mistake.
Even if you do everything right, that’s no guarantee that you won’t be sued. Frivolous lawsuits are filed all the time. And lawsuits are expensive, even if you win.
Myth #8: I’m a small business; I don’t have to worry about cyber attacks.
You may be surprised to know that small businesses are actually the preferred target for hackers. Why?
You might not have the revenue of a Fortune 500 company, but cyber criminals have learned that smaller businesses have implemented little to no security measures. Such weak security means that your data (more specifically, your customers’ data) low hanging fruit.
Cyber Risk Insurance that protects both you and your customers from a data breach is well worth the monthly premiums.
Myth #9: You don’t need Workers’ Comp unless you work in a warehouse.
Business owners believe a lot of really dangerous workers’ comp myths, but the most dangerous one is any myth that convinces you that Workers’ Compensation Insurance is unnecessary.
For starters, Florida law mandates that businesses over a certain number of employees must carry Workers’ Compensation Insurance. If you go without this vital form of coverage, you risk hefty fines.
Second, these laws exist for the simple reason that every job position carries a possibility of severe injury, even in office environments.
It’s impossible to predict which workplace injuries will occur or how severe they will be. If you’d rather not pay those medical bills out-of-pocket, you’ll need Workers’ Comp.
Myth #10: You can lower your premiums by reporting a lower payroll/revenue.
Money is one of many factors that insurance companies use to determine the cost of your premiums, but this should never be taken as an invitation to “massage” the numbers for your benefit.
This is nothing less than insurance fraud, and it’s one of the main reasons that insurance premiums are continuing to rise.
That’s right. Trying to lower your premium will actually have the opposite effect.
Many commercial insurance policies are auditable, which means a lowball figure will be corrected, and you’ll get a bill. It can work the other way too. Often times, if you have a slower year, your audit can result in a refund!
Your business isn’t just some place you hang out at for 8+ hours a day. It’s the reason that you and your family have a roof over your head and food on the table. It works hard to support you, and it deserves to be protected.
And the best way to protect it is by speaking with an independent insurance agent and getting the right level of coverage for your risk profile.
Harry Levine Insurance has been one of Orlando’s premiere commercial insurance agencies for more than 40 years and we have made it our job not just to connect our clients with insurance policies, but to educate them on the industry so that they can better protect themselves in the future.
Got more questions or business insurance myths that need answers? Give us a call! We’re happy to help.