Director of Business Development
A comprehensive, customized insurance program is vital to the success and security of any business, and therefore should designed with the utmost care and consideration.
Frankly, I'm amazed by some of the policies I review. There are many good insurers out there, but there are too many careless and under-informed ones, too, as I'm frequently reminded when I analyze a prospective client's existing coverage.
Some Business Insurance mistakes result from an insured's reluctance to purchase coverage, while others result from an insurer's error or omission, but all mistakes leave a business at risk of a potentially devastating loss.
The list of common mistakes is long — as this FitSmallBusiness.com compilation of examples from attorneys, insurance professionals and business executives attests — and my colleagues at Sylvia Group and I go to great lengths to avoid them whenever we review or write coverage. It's a never-ending challenge, but providing clients with the cost-effective coverage that fully protects their business is what makes the job of a good insurance adviser rewarding.
Here are the seven most common Business Insurance mistakes I discover when reviewing prospective clients' policies:
1. Lack of Mod analysis to reduce Workers' Comp premium
You know how expensive Workers' Compensation Insurance is, and I don't need to tell you what an obstacle that can be to growing your business. But did you know that you can greatly lower Workers' Comp costs by taking steps to lower your Experience Modification Rate, better known as your "Mod?"
The first step is Mod analysis, a service Sylvia Group performs for Business Insurance clients as part of SPS — the Sylvia Protection System. Mod analysis enables you to see the causes of a high Mod and determine solutions. It also can detect whether an underwriter made a costly mistake in calculating your Mod, and it can determine whether you're eligible for the Massachusetts Qualified Loss Management Program (QLMP) after being subjected to the Assigned Risk Pool.
2. A priority on price over value
Many businesses view insurance as a necessary evil rather than as valuable protection. Those who do are prone to go bargain-hunting for cheap insurance, which more likely than not will fail them when it comes time to submit a claim that ultimately turns out to be uncovered under the so-called bargain policy.
This is where the role of an independent insurance agent may be most critical. An independent agent can market your business to multiple insurance companies, making sure you get the right coverage at a competitive price — the greatest value for your insurance dollar.
Acadia Insurance — one of many companies Sylvia Group works with to provide customized, cost-effective insurance coverage — recently shared this insightful, concise blog post from a New Hampshire agency: 10 Reasons to Choose an Independent Insurance Agent.
3. No protection under an umbrella
Maybe it's the formal name: Excess Liability Insurance. "Excess" is, by definition, "an amount of something that is more than necessary." But think about what Excess Liability Insurance — also known as Umbrella Liability Insurance — does: It provides coverage beyond the limits of the underlying commercial auto, product liability and premises liability coverage in the event of a severe loss.
4. Lack of Employment Practices Liability Insurance
Hard to believe in the #MeToo era, but many businesses neglect to protect themselves from the risk of a lawsuit by a current, former or prospective employee. Sexual harassment, discrimination, wrongful termination — all are common claims in Employment Practices Liability (EPL) suits, and whether the employer is guilty of the alleged offense or not, defending such a suit can come with enormous costs.
5. Failure to include Business Interruption in cyber coverage
Business interruption is a potentially lethal consequence of a cyber breach — especially to an organization that does much of its business online or during one or two peak seasons — yet many Cyber Insurance policies exclude business interruption coverage unless the insured requests it and pays additional premium. Almost every business should have cyber coverage, and every Cyber Insurance policy should cover business interruption.
6. Absence of Key Person Life Insurance for partners and key employees
What would happen if a business partner or an employee whose role is essential to the business' operations died suddenly or suffered a debilitating injury? A life insurance policy with the business as the beneficiary can save a small or midsized business in the event of a partner or key employee's death, and many policies also provide coverage for chronic and debilitating illness or injury.
7. No tax-advantaged Executive Bonus plan
Under Section 162 of the federal tax code, employers can provide executives with supplemental benefits through the purchase of Life and/or Disability Income Insurance using tax-deductible dollars. Section 162 Executive Bonus plans benefit both employers and employees, and yet many businesses fail to take advantage of the plan.
All of these coverages cost money, naturally, but the costs of being under-insured can be far greater. Paying for insurance and then finding out your policy doesn't cover a loss is beyond frustrating. For a business, it can be fatal.
Recognize that insurance is an investment in protecting your future, and avoid these all-too-common Business Insurance mistakes.
About Mike Isbister and Sylvia Group
Throughout his 30-year career in sales and service, Mike Isbister has achieved success by combining analytics and action, recognizing that having meaningful data is important — but only if you know what to do with it. The analytics-plus-action approach works not only for Mike and his team but also for Sylvia Group clients. Through the SPS process of compiling and breaking down data, they’re better able to analyze needs and exposures, review claims to determine risk-management solutions, and design comprehensive, cost-effective insurance programs.
A repeat winner as "Best Insurance Agency" in the SouthCoast Media Best of the Best Awards program, Sylvia Group helps businesses and individuals protect their future by designing insurance, benefits and financial planning programs. We’re a locally owned agency known for our commitment to our clients and our community, as well for our industry expertise. Founded in New Bedford, MA, in 1950, headquartered in neighboring Dartmouth, and serving businesses and individuals throughout Massachusetts, Rhode Island and beyond, Sylvia Group is certified as a Woman Owned Business Enterprise with the Massachusetts Supplier Diversity Office and has the distinction of being the first six-time recipient of the Five Star designation awarded by the Massachusetts Association of Insurance Agents (MAIA) for all-around agency excellence.