There are times that small business owners accidentally allow their business insurance to expire. They’re bad people with no redeeming qualities. Just kidding – it’s not totally uncommon for a business to forget to make a payment or to miss their insurance renewal date. And while it does happen, that doesn’t mean it’s no big deal – there are consequences and risks to not having insurance coverage for your business.
While you’re at it, keep an eye on your business credit. Nav’s Business Boost can help you get ahead with tradeline reporting.
Operating without Workers’ Compensation Insurance
If you allow your workers’ comp insurance to expire, even for a short amount of time, you risk fines or even jail time depending on the laws in your state. Yeah, you probably broke the law. Nearly every state has strong laws about maintaining workers’ compensation insurance at all times. In addition, your company is still responsible for paying claims, even if you don’t have coverage. If your employee is injured and you don’t have workers’ comp (and are required to), the employee could sue you in an effort to cover medical costs.
Risking an Accident
On the note of an injury while you’re not covered – whether it’s an injury by an employee or an injury by a guest, you may be liable for expenses. If your coverage lapses and an injury occurs, your insurance provider may not provide the coverage you need. Your provider is not obligated to backdate your coverage once your policy is active again. In some cases, an insurance provider will provide you with a back-dated policy if you provide a “no-loss” letter, which guarantees them that no injuries or incidents happened during the specified time period. But, again, without coverage, you risk paying out of pocket for an incident that your insurance would have otherwise covered.
Risking Future Insurance Coverage
It’s possible that your current insurance provider will decline to re-issue you a policy. Why? Well, an insurance company’s focus is all about evaluating risk. Letting your business insurance expire is a red flag for business operations, and it could be an indicator that you’re not doing well financially. Other insurers may see the time lapse as a red flag and while they’ll provide you a policy, you may pay higher insurance premiums.
Risking Your Lease
If your business is operating in a leased building, there’s a strong chance that your lease agreement states that you must have certain insurance requirements/minimums. So, a lapse in insurance coverage means you’re also now in violation of your lease and, you guessed it, you could get kicked out of your business location. That could severely disrupt your ability to do business and be successful.
Other Mistakes to Avoid
In addition to waiting too long to shop for or renew an insurance policy, there are a number of other common mistakes small businesses make when looking at their insurance. We put together a list of the 9 most common mistakes small businesses make when buying insurance to help you not only avoid a lapse in coverage, but to help you save time and money.