Common Mistakes to Avoid

Underinsurance means your coverage limits are too low to fully cover a loss.

How it happens:
- Business grows but coverage doesn't
- Underestimating replacement costs
- Choosing low limits to save on premiums
- Not updating coverage after major purchases

Consequences:
- Paying out of pocket for the uncovered portion
- Coinsurance penalties (property insurance may pay even less)
- Personal liability if business can't cover the gap

How to avoid it:
- Review coverage limits annually
- Update property values regularly
- Consider umbrella coverage for catastrophic protection
- Ask "what's the worst that could happen?" and ensure you're covered

Coinsurance trap: If you insure property for less than 80% of its value, you may receive proportionally reduced claim payments.

Coverage gaps are risks you face that aren't covered by any of your policies.

Common gaps businesses overlook:

Cyber liability
Most GL and property policies don't cover data breaches or cyber incidents.

Employment practices
Claims from employees about hiring, firing, discrimination, or harassment.

Professional services in GL
GL excludes claims arising from professional advice - need separate E&O.

Flood and earthquake
Almost always excluded from standard property policies.

Hired and non-owned auto
When employees use personal cars or you rent vehicles for business.

Business interruption
Lost income when you can't operate - not included in basic property.

How to find gaps:
- Review your policy exclusions carefully
- Ask your agent specifically about gaps
- Compare your risk assessment to your coverage
- Review coverage when business activities change

A lapsed policy means your coverage has ended, leaving you uninsured.

How lapses happen:
- Missed premium payment
- Non-renewal notice not received or ignored
- Thinking you're covered when you're not
- Administrative errors

Consequences of a lapse:
- No coverage during the gap period
- Claims-made policies may lose prior acts coverage
- Reinstatement may be more expensive
- May need to re-qualify for coverage
- Some insurers won't cover businesses with lapse history

How to prevent lapses:
- Set up automatic payments
- Use calendar reminders for renewals
- Keep contact information current with your insurer
- Open and read all insurance mail
- Work with your agent on renewal timelines

Poor documentation can result in denied claims or reduced payments.

Documentation mistakes:

Not documenting incidents when they happen
Memories fade, witnesses disappear, evidence is lost.

Inadequate inventory records
Without proof of what you owned, claims for theft or damage are difficult.

Missing maintenance records
Some claims require proof of proper maintenance.

No photos before the loss
Hard to prove prior condition without documentation.

Lost policy documents
Not knowing what you're covered for until it's too late.

Best practices:
- Take photos/video of property and inventory regularly
- Keep detailed inventory lists with values
- Maintain maintenance records
- Document all incidents immediately, even minor ones
- Store copies of policies and declarations pages securely
- Keep contact info for agents and claims lines accessible

Many business owners never read their policies and are surprised by what's not covered.

Consequences of not reading:
- Discovering exclusions at claim time
- Not knowing about conditions you must follow
- Missing coverage you're paying for
- Not understanding your deductibles and limits

What to review:
- Declarations page - Verify accuracy of all information
- Insuring agreement - Understand what's actually covered
- Exclusions - Know what's NOT covered
- Conditions - Understand your obligations
- Endorsements - See what modifications apply

When to review:
- When you first get a policy
- At every renewal
- When your business changes
- Before you need to file a claim

Ask questions: Your agent should explain anything you don't understand.