Have you looked at the wording of your business insurance policy lately? I have seen countless startups naively place coverage and forget about it. They grow, the business particulars change and their same policy auto renews year after year. Since most insurance carriers and brokers don’t put in the effort to follow up with small but growing businesses, there could be major gaps in the necessary coverage and wording of your insurance policy.
Business Changes that Require Insurance Policy Wording Updates
Anytime there is a change in the value of your BPP (Business Personal Property), you should re-evaluate your business insurance policy - even if your carrier doesn’t reach out.
The reason a small business may get little to no follow up on business changes is because of the classification process in most insurance companies. They will put the company in a small business unit where they don’t have the resources or incentive to make regular contact.
Why is this important? Well, let’s say that you had $10,000 in Business Personal Property (BPP = Furniture, Fixtures & Equipment) when you started your business five years ago. You are now five years down the road; the company has grown, and you now have five times the employees with BPP that has grown to $30,000 in assets.
If you have a major loss or theft with most or all of the assets taken, you will file a carrier claim. You proceed to list those items that were lost in the fire or stolen to be compensated by your insurance carrier. To add insult to injury, you received a questionnaire from the carrier every year asking if you had purchased any furniture, fixtures, or equipment in the past 12 months or need to make any changes to the policy. You neglected to send back the questionnaire every year and your broker did not contact you because the account is in the small business unit.
The Consequences of Failing to Update your Policy
The final blow, the claims adjustor receives your documents for your loss and proceeds to tell you that you have $10,000 in coverage minus the deductible of $1,000. In essence, you will get $9,000 for your loss, out of $20,000 for company or broker failure to notify the carrier of increased asset purchases.
The moral of the story – make sure that you check your policy on an annual basis and that your broker or carrier is aware of any changes to your coverage limits.
True story, this happened to a friend of mine; quite costly to learn a lesson of this nature! This not how I conduct business with my clients, but you can see how easy it is to let things go because more assets mean a higher premium and who wants to pay more until you have the covered loss!