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5 Critical Insurance Mistakes Small Business Owners Make

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Don't Let Your Business Go Bust: 5 Critical Insurance Mistakes Small Business Owners Make (and How to Avoid Them)

Running a small business is an exciting adventure, but it also comes with inherent risks. From property damage to customer legal actions, unforeseen events can threaten your financial stability. That’s where business insurance comes in – a safety net to catch you if you fall.

However, navigating the world of insurance can be tricky. Here at FD Beck Insurance Brokers, we see small business owners make a few critical mistakes that can leave them exposed. Let’s explore these mistakes and equip you with the knowledge to avoid them:

Mistake #1: Skipping Insurance Altogether

This might seem like a way to save money upfront, but it’s a gamble you simply can’t afford to take. A single incident – a fire, a theft, or even a slip-and-fall accident – can cripple your finances without proper insurance coverage. Without liability insurance, a lawsuit from a bodily injury claim could cost you hundreds of thousands in legal and compensation costs. Similarly, if your business property is damaged by a natural disaster like a flood or earthquake, the repair costs can be devastating. Investing in comprehensive business insurance policies is essential for protecting your business from these unpredictable events.

Mistake #2: Having the Wrong Type of Cover

Business insurance isn’t a one-size-fits-all solution. Different industries and business models face unique risks. Working with a qualified insurance broker ensures you get a tailored policy that addresses your specific needs. For instance, if you run a manufacturing business, product liability insurance is crucial to protect against claims of bodily injury or property damage caused by your products. On the other hand, if you provide professional services, professional liability insurance (also known as errors and omissions insurance) is necessary to cover claims of negligent advice or mistakes. Understanding the specific types of insurance your business requires can save you from significant financial losses.

Mistake #3: Underinsuring Your Assets

Inflation and property values can rise over time. Don’t make the mistake of basing your coverage on outdated valuations. Regularly review your policy and adjust the sum insured to reflect the current value of your equipment, inventory, and property. Ensuring adequate insurance for your business assets is essential to avoid financial setbacks.

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Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

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A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

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Mistake #4: Not Understanding Exclusions

Every insurance policy has exclusions – events or situations not covered. Carefully read and understand these exclusions to avoid any nasty surprises down the track. Knowledge of legal costs, natural disasters, and business interruption insurance can prevent unexpected financial burdens.

Mistake #5: Not Updating Your Policy as Your Business Grows

As your business expands, your insurance needs evolve too. New employees, additional locations, or changes in services offered might require adjustments to your policy. Regularly review your coverage and update it as your business grows. Ensure your insurance coverage evolves with your business growth to mitigate potential business risks.

Insurance Brokers specialise in helping small businesses navigate the complexities of insurance. We can help you:

· Identify the right types of insurance for your business.

· Tailor a policy that meets your specific needs and budget.

· Obtain competitive quotes from reputable insurers.

· Ensure you understand your policy coverage and exclusions.

· Review and update your policy as your business grows.

Don’t let a lack of insurance knowledge put your business at risk.

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General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

FD Beck Insurance Brokers, ABN 68 004 455 038, AFSL 233784

This article originally appeared on Don't Let Your Business Go Bust: 5 Critical Insurance Mistakes Small Business Owners Make (and How to Avoid Them) and has been published here with permission.