5 Common Problems with Business Insurance

We will be the first to admit business insurance isn’t perfect. It’s complex, varies significantly, and sometimes we walk around the Berry Insurance office with boggled minds, trying to collaborate to figure out an answer to a business insurance question.

So we sure as heck don’t expect you to be able to solve all your business insurance problems on your own.

But that’s what we’re here for! In working in commercial insurance for 100 years, we sure have seen a lot. We know some of the most common problems with commercial insurance, so we want you to be prepared for what could become an issue with your business insurance. More importantly, we want you to know how to prevent these issues before they happen.

So in this article, we will explain 5 common problems with business insurance, and let you in on their solutions.

1. You could be rated incorrectly by a carrier

When quoting business insurance, carriers “rate” your business to determine your risk. This rating will help determine how much insurance you need, and how much your insurance premium will cost.

But the thing is: every carrier interprets risk differently, therefore they rate businesses based on different factors. Some carriers rate businesses based on sales and revenue. Others may rate based on payroll. Others may use a combination of sales/revenue and payroll.

The discrepancies in ratings can cause significant variation in quotes. Worse, it can result in inadequate coverage. 

For example, a business owner may do photography, videography, and graphic design, but the insurance carrier could just be rating him for photography (this is actually an example we saw recently when asked to review someone’s insurance through a different agency). As a result, this business owner was not rated properly, and was not adequately covered for all of his exposures. He may have been paying less for his insurance than a more thorough agency, BUT, if he ever had a claim, he could be not covered and stuck with a huge out of pocket expense.

The solution: Work with a thorough agent who really takes the time to get to know your business. Make sure the agent is asking detailed questions during the quoting process and that you are answering all their questions honestly. Make sure you are disclosing every detail of your business operations and equipment. This will ensure you are rated properly and fully covered.

2. Carriers may require an audit

Depending on your industry and the type of business you run, insurance companies could deem you auditable.

Carriers do this because if they feel like there could be some sort of change in the metric you are rated on from the beginning to the end of your policy period, they think doing an audit could get them extra premium. 

Typically the types of businesses carriers deem auditable are the ones based on sales or payroll (because this could change throughout the policy period) but whether they decide to can be inconsistent.

The solution: Be prepared for the fact that you could be considered auditable, but that it will vary from company to company. Work with an agent who will educate you on your carrier options, make sure you are with the right fit, and help prepare you for a potential audit.

3. You could have out-of-date coverage

As I’m sure you are aware, things can change really fast in your business.

Since policy periods are typically a year, anything that changes in a year could cause your insurance to not be up to date. Or worse, if you don’t thoroughly review your policy before renewing each year, it could be several years out of date, and not properly covered at all. 

The solution: Make sure you contact your agent immediately if you’ve had any changes in operations, property changes, new equipment, changes in staffing/payroll, changes in revenue, changes in ownership/business structure, territory changes, new contracts, or changes to business vehicles/drivers. Also, you should work with an agent who is proactive about sitting down with you each year to thoroughly review your policies before renewing.

For more information, check out this article: Why You Should Review Your Commercial Insurance Annually.

4. You may be missing out on discounts

With insurance prices on the rise,  you're likely looking for ways to save money on your policy. This makes it important for any business owner to know of the discounts they're business policy is eligible for.

Some carriers will credit you for having certain risk management solutions in place, such as a building in good condition, updated roof/plumbing/HVAC systems, sprinklers, alarm systems, etc.

If your agent wasn’t thorough enough in asking questions about your business, they might not have enough information, and you could be missing out on some of these carrier discounts.

The solution: Again, make sure you are working with an experienced and thorough business insurance agent who really dives deep and gets to know your business. Disclose any and all business information to your agent. This will ensure the carrier has all the information they need to apply the credits you deserve.

5. Business insurance is complex

There are several other issues you could experience with business insurance, but they can all be wrapped up with this overarching statement: business insurance is just complex.

At Berry Insurance, we’ve been managing business insurance for decades and we are still always coming up with new questions and discovering new scenarios and nuances to business insurance.

The coverages and exclusions are complicated, the forms are complicated, the processes are complicated -- and they all vary!

It’s kind of like snowflakes. No two businesses are the same, so no two business insurance policies are the same. 

So if you’re trying to understand your policy on your own, you’re probably going to struggle. And because each carrier has their own rules and processes, if you think you have an answer with one carrier, it may not be the same with another carrier. 

The solution: Not to sound like a broken record, but we really want to stress working with a reputable independent insurance agency. Your agent should be thorough, attentive to your business and its needs, and be willing to educate you. A great agency will be proactive about educating you and thoroughly answering all your questions so you can feel confident that your insurance is adequately protecting you.

And we can help with that! Check out our Learning Center, which we update several times a week with the answers to questions our clients are asking us about business and personal insurance.

With the right agent, you can dodge these common business insurance problems

Like with anything in life, business insurance has problems. But fortunately, it’s not entirely your job to deal with these problems -- it’s your insurance agent’s. 

That’s what we do at Berry Insurance! We take a thorough approach to help our business insurance clients prevent common business insurance problems, or manage them. 

So if you’re ready to find an agency that will do the same for you, check out this article: What to Look For when Selecting an Insurance Agency or Company.