Insurance isn’t cheap, and the prices are only increasing in response to the rising cost of repairs, materials, and medical expenses. Many business owners are now looking at their bills and increased insurance rates and asking if they should keep paying their business insurance or if they should try to manage without it. Your business insurance is incredibly important, and it helps protect you from financial consequences, legal consequences, and even potentially losing your business.
If you are still considering cancelling your commercial insurance policy, there are a few factors that you need to consider before you do.
What does my insurance coverage even do?
You might be looking at your policy and wondering what exactly you are paying for. Understanding what and why you are covering is the first step in understanding why insurance is so important for businesses.
- Liability Insurance: This is one of the more common insurance terms, and the most popular type of business and vehicle insurance. Liability insurance helps protect you if you or your business causes an accident which results in property damage or injury. Many states require businesses to carry liability insurance to protect others.
- Commercial Vehicle Insurance: If you are using a vehicle for your business, personal auto policies likely won’t be able to cover losses in the event of an accident. Commercial vehicle policies help protect you from losses if you are found at fault for an accident.
- Business Owner’s Policy: This insurance helps to protect your business by covering buildings, property within the building, and even lost income if an accident causes you to be out of business due to a covered accident. This can include circumstances like snow, fire, theft, wind, etc.
- Worker’s Compensation: If one of your employees is injured on the job, those medical bills need to be paid for and that is where worker’s compensation insurance comes in. This insurance helps to protect your employees and your business from paying out of pocket for medical fees and lost wages. This insurance is also required in many states.
What can happen if I cancel my insurance?
Now that you understand what your insurance can do, it is important to understand what can happen if you don’t have it.
Accidents are called accidents for a reason. Nobody locks up their business at night thinking that someone is going to break in, or that it will be destroyed in a fire. Yet, these events can happen even if you do everything right. Without an adequate insurance policy, your business would be responsible for covering and replacing these losses out of pocket. The same goes for medical bills that might occur as a result of an accident. Insurance can not only help pay for repairs and replacements, but it can also help pay lost revenues if your business is out of commission during covered repairs.
The same is true for accidents involving damage caused to a client’s property or injuries to workers. They can have drastic consequences, and they can happen to anyone. You may be required to pay out of pocket for repairs or medical bills, but you could also face lawsuits and high court fees if they sue your business for damages and you do not carry a proper insurance policy.
If you live in a state that requires liability or worker’s compensation insurance, you could face legal consequences including fines, loss of your business license, and even criminal prosecution and imprisonment in some states. This could cause irreparable damage to your business reputation even if you are allowed to keep operating. You could also be subject to increased insurance rates when you do begin carrying insurance.
The most consistent risk is the excess costs associated with not carrying an insurance policy for a period. What seems like a quick way to save some money in the short term might end up costing you even more in the long term.
What additional consequences can I face for operating without insurance?
There are other repercussions to consider before you pull the plug on your policy.
- Building leases: If you are leasing an office building from an organization that requires liability insurance, they can cancel your lease even if you’re paying rent on time.
- Loss of business: Many clients, businesses, and vendors require that you have an active insurance policy in order to gain a contract with them. Lose your policy, lose the business.
- Loss of employees: If your employees discover that the business is no longer insured and they are no longer protected, they might find work elsewhere.
- Cancellation of loan: Many business loans require insurance policies to remain active, and if a loan officer discovers that you’ve canceled your insurance, you could lose the loan, and be required to pay the outstanding costs.
- Stress and Anxiety: While the physical consequences can be severe, the emotional turmoil and fear of running an uninsured business can be devastating. Every time an employee leaves, or you leave a client’s house, or you lock up your business for the evening, there is a chance that an accident can happen, and without an insurance policy you will likely be very aware of this risk. An extended period of this stress and anxiety can affect your sleep, mental health, and even your physical health.
What can I do instead of canceling?
If you are worried about insurance costs, there are other options to help control costs rather than canceling your insurance. It is important to find the solution that is going to work for you, your employees, and your business. Here are a few suggestions:
- Adjust your coverage: Reach out to your insurance agent and reassess your current coverage to determine if there is anything you can adjust to make it more affordable and still keep protection.
- Shop for more affordable options: Look around for less expensive insurance options. It is important to remember that cheaper coverage doesn’t always equal better coverage.
- Look for discounts: Many insurance companies offer discounts for small business insurance. These can include bundling multiple policies, group rates, loyalty discounts, and even safety discounts.
- Consult an agent: Even just speaking to an insurance agent can potentially help you lower your insurance costs because you might be paying to cover something you no longer need.
Don’t cancel your business insurance without considering exactly what consequences your business could face, and the costs that could be associated with being uninsured. Consider other options to make your cost of insurance more affordable while still protecting your livelihood.
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