Introduction
Owning a small business is exciting, but it also comes with risks. Insurance is one of the best tools to protect your hard work — yet too many business owners make costly mistakes when it comes to choosing, managing, or even understanding their coverage.
In this article, we’ll highlight the top 10 insurance mistakes small business owners make — and, more importantly, how you can avoid them.
1. Buying the Cheapest Policy
Many owners shop for price instead of coverage. The cheapest option often comes with gaps that can leave you exposed.
👉 Fix: Balance cost with coverage. Look at what’s included, excluded, and the coverage limits.
2. Not Reviewing Coverage Annually
Businesses grow, add staff, or change services. Insurance needs change too.
👉 Fix: Schedule a yearly review to make sure your coverage matches your operations today.
3. Assuming Personal Insurance Covers Business Risks
Personal auto or homeowners’ policies rarely cover business activities.
👉 Fix: If you drive for work or run a business from home, get commercial auto or a business owner’s policy.
4. Underinsuring Property and Assets
Business owners sometimes pick coverage limits that don’t reflect actual replacement costs.
👉 Fix: Insure property for replacement value, not just current market value.
5. Forgetting About Cyber Risks
Cyberattacks are one of the fastest-growing risks for small businesses. Many owners skip cyber coverage thinking it’s only for big corporations.
👉 Fix: Even a small breach can cost thousands. Cyber liability insurance is affordable and essential.
6. Misclassifying Employees or Contractors
Worker misclassification can lead to fines, denied claims, or uncovered injuries.
👉 Fix: Work with your insurance agent to properly classify staff and subcontractors.
7. Ignoring Industry-Specific Coverage
Restaurants, contractors, and consultants all face unique risks.
👉 Fix: Customize policies to fit your industry, such as liquor liability, errors & omissions, or inland marine.
8. Skipping Workers’ Compensation
Even if it’s not required, skipping workers’ comp puts you at risk if someone gets hurt.
👉 Fix: Carry workers’ comp coverage or similar protections, even if you have just one employee.
9. Not Understanding Policy Exclusions
Business owners are often surprised by what isn’t covered.
👉 Fix: Review exclusions carefully with your agent so you’re not blindsided later.
10. Failing to Work With an Independent Agent
Going directly to one carrier limits your options.
👉 Fix: Independent agencies like EL Risk shop multiple carriers to get you better coverage at competitive rates.
Conclusion + Call-to-Action
Avoiding these common mistakes can save you money, stress, and potentially your entire business.
👉 Ready to make sure your coverage is mistake-free? Contact EL Risk today for a free insurance review tailored to your business.