Business owners in Hawaiʻi have a responsibility to themselves and their employees to maintain comprehensive liability insurance. While their insurance needs may change depending on their location, industry, and other factors, business owners need to understand the insurance risks they face and the right policy coverage to provide protection.
Every business is vulnerable to risks such as fire, weather, theft, flooding, and market changes. In Hawaiʻi, these risks can be especially heightened. While most businesses have some form of liability insurance, many make mistakes in their risk assessments and purchase policies with insufficient or excessive coverage.
This list reviews the top insurance mistakes that business owners can make, and more importantly, how to avoid them.
1. Opting for the Cheapest Policy
Typically, new business owners, or those in difficult times lean toward cheap policies with their basic coverage, usually with high deductibles, for common types of damage to business assets. However, underestimating the business’s coverage needs can lead to more costly coverage gaps and low liability limits that negatively impact a business’s bottom line in the long run.
Unfortunately, many business owners discover this the hard way when trying to file a claim that either:
- Exceeds the liability limit of their policy (i.e. Underinsured)
- Is not specifically covered (e.g. Flood Damage)
In both scenarios, the business owner will save money on their monthly premiums by opting for a cheaper policy but will now be responsible for paying massive expenses out of pocket due to low liability limits.
Doubling the coverage limit does not usually mean doubling the price of the plan. Business owners should opt for the plan that offers the right coverage amount for their needs without prioritizing the lowest possible premiums.
2. Paying for Unnecessary Coverage
While some business owners mistakenly prioritize low premiums, others pay for coverage they do not need. As a result, some business owners have liability limits that cover more than their assets are worth. For example, if the business property is only worth $600,000, paying for $1 million in coverage is not necessary.
This often happens when businesses scale down their operations without reassessing their insurance needs. If the asset value, property size, or operational structure have recently changed, business owners should reassess their insurance plans as well. They may be paying for coverage that exceeds their needs or covering assets they no longer own.
3. Failing to Reassess Changes
Many operational changes can shift the company’s insurance needs. Reassessing business insurance changes should go beyond removing unnecessary coverage and updating coverage limits.
A regular assessment, ideally on an annual basis, to determine whether the current policy meets the needs of the current workflow, can help avoid coverage gaps. These changes can include:
- A new location, which may bring additional coverage needs due to environmental damage or increased crime rates.
- If the number of employees at the business changed, the workers’ liability needs may have changed.
- New equipment purchases may result in new risks that need to be covered.
- Financial growth or decline can make the old policy’s coverage limit obsolete.
Many business owners in Hawaiʻi succeed in buying an insurance policy that fits their needs at the time of the purchase. However, if they fail to reassess how changes in their business change their insurance needs, the policy will not do its job for long.
4. Being Unaware of the Fine Print
Many business owners fail to read the fine print of their insurance policies. As a result, they may believe they are covered for certain eventualities when, in reality, they are operating their business with dangerous coverage gaps.
Liability limits that only apply in certain situations, situational workers’ compensation criteria, and exclusions for specific types of damage, such as weather and normal usage damage, can all remain hidden without a thorough review.
Business owners should not wait until their claim is denied to read the fine print on their policy and comprehend the details of their coverage.
For example, some insurers do not provide legal representation in the event of a liability lawsuit while others do. It’s imperative for business owners to speak with the policy provider to understand their coverage in detail.
5. Operating at High Risk
Operating at high risk is a critical insurance mistake made by many business owners in Hawaiʻi. Strategic risk management investments can lower a business’s premiums by proving to insurers that the business is committed to safety. Simple strategies can include:
Businesses can install better security systems to prevent theft- Change their disclosure agreements to prevent lawsuits
- Invest in employee training programs (especially for businesses that operate machinery or vehicles)
- Implement workplace safety courses to prevent workers’ comp cases
Even small improvements in the safety infrastructure can drastically improve a business’s insurance premiums.
Contact Atlas Insurance to Prevent Business Insurance Mistakes
At Atlas Insurance, we serve businesses in Hawaiʻi, providing comprehensive insurance policies that cover employees, property, assets, and vehicles from common damages. For over 90 years, our local agents have been taking the time to help businesses prevent common business insurance mistakes.
We invest in your success by reviewing policies in detail, reassessing them regularly, and customizing coverage for your business’s specific needs. Contact our team to learn how our policy options can protect your business against any eventuality.