Lessons Learned, Part 3: Finding and Filling Gaps in Your Small Business Insurance

Finding and filling gaps in your small business insurance

A single gap in your business insurance coverage could spell disaster for your company, causing you to shut your doors for good. Small business insurance gaps are common, so review this list and consult with your insurance agent to make sure all of your bases are covered. Don’t land in hot water for something that could have been easily prevented.

Workers Comp

Workers comp is especially relevant to hardwood floor contractors, so it’s important to know where you stand on this issue.

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Even if the people who work for you file their taxes as independent contractors, it is very important for you, as a business owner, to have a workers comp policy to protect yourself from liability.

It is becoming increasingly difficult to claim that your subcontractors are actually contractors and not employees. If one of your subcontractors gets hurt on the job, you could be in trouble with the law if you do not have a workers comp policy — even if they are not classified as your employee.

General Liability Insurance

General liability insurance is one of the most basic types of insurance that every small business owner should have. It protects you from liability resulting from injury, accidents, or death on the job.

This type of insurance is especially important for hardwood floor contractors because a large part of your work involves handling volatile chemicals and heavy machinery on other people’s property.

General liability coverage also protects you in the case of lawsuits involving bodily injury that occurs on your property, such as a slip-and-fall accident that happens when a client is visiting your shop.

Your general liability policy could save you from hundreds of thousands in damages, the likes of which could force you to close your doors for good.

Professional Liability Insurance

Professional liability insurance protects you from accusations of on-the-job negligence, mistakes, and wrongdoing. Unlike other types of insurance, a professional liability policy protects you against claims involving intellectual or financial harm rather than physical harm.

A professional liability insurance gap can result in a lawsuit that puts you out of business.

It’s important to keep in mind that a lawsuit resulting from something that isn’t even your fault could still land you in court and potentially put you out of business.

For example, let’s say that you install flooring in a client’s house. You follow the manufacturer’s instructions regarding relative humidity levels, take several moisture measurements while completing the installation, and at the end of the job you give your client a care guide instructing them to take humidity measurements every so often. The care guide also warns the client of the possibility of gaps in the flooring during the winter, even if they take measures to control the humidity levels throughout their home.

The client calls you back the winter after your installation because they’ve noticed gaps in their flooring. When you offer to go check it out, they inform you that they’ve already hired another contractor to reinstall the floors. The client files a lawsuit against your company to cover the reinstallation cost.

Even though the gapping wasn’t enough to warrant a complete reinstallation, it wasn’t a result of your negligence, and you forewarned the client of the possibility of gaps during the winter, you could be found liable for damages. However, the right professional liability policy could help cover the cost of attorney’s fees and other expenses associated with going to court.

Lesser-known coverage options

Did you know that you could still be sued for mistakes that you made during your time as a small business owner even after you retire or exit the industry? Once you discontinue your professional liability coverage, there’s a gaping hole in your protection which leaves you open to accusations of negligence and wrongdoing during your time in business.

And if that happens, you’ll be alone in trying to cover your defense costs — unless you’ve invested in what’s known as “tail coverage”. This type of insurance is designed to protect you from claims regarding the tenure of your working life after you cancel your business insurance.

Another common gap in small business insurance coverage occurs when you blend work and home in terms of your auto insurance. If you just have a personal auto policy for your work vehicle, you may find yourself struggling to pay repair costs if something happens to it.

How many job sites you visit on an average day, the type of vehicle in question, and who drives the car are all factors that affect whether or not you need commercial coverage. If you only have a personal policy on your vehicle right now, consult with your auto insurance company to figure out whether you need commercial auto insurance.

Some takeaway advice for business owners

Consult with an insurance agent to discover and eliminate any possible gaps in your coverage. Do it sooner rather than later — eliminating gaps in your policies and having the right coverage could literally save your business. If something happens, you’ll be grateful that you sorted out your insurance beforehand.

You can access the other installments of our “Lessons Learned” series here.

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