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How to Avoid Commercial Insurance Pitfalls

Don't Allow Your Business to Fall into these Common Coverage Gaps

With the daily grind of project management, subcontractors, and employees, many entrepreneurs simply do not have the time to consider which commercial insurance is best for their business. This is especially true given all of the, often contradictory, information available online. In many ways, it is next to impossible to know “who you can trust.” This is where a local independent insurance agent can help! They will take the time to sit down with you, face-to-face, and will explain the policies and coverage options that will fit the exact needs of your business.

Here is a list of dos and don’ts to review with your local independent agent:

Do - Use your agent to shop around. This is one of the most important benefits of working with a local independent agent. Unlike captive insurance agents, who represent one insurance company, an independent agent sells policies from a wide variety of trusted providers. They do the shopping for you by utilizing their expertise to select a policy that offers the best coverage for your business.

Don’t - Focus solely on cost. This is one of the leading causes of gaps in coverage for your business. As a general rule, if one policy’s premium is significantly lower than competing policies’ premiums, you should ask why it’s so low. Comparing between responsibly priced polices from reputable carriers can be complex, but your independent agent will help you understand the differences.

A person wearing safety goggles is crouched down and holding a drill in front of a wall with a window.


For example, if you are a mechanic who is purchasing commercial insurance to cover your shop, you can often choose between coverage for the actual cash value (ACV) or the replacement cost (RC). At first glance, these two types of coverage look the same, but the premiums for a policy that covers the RC are always higher than those that cover the ACV. With ACV, there is a deduction in coverage to account for any depreciation of value over time. For example, if an expensive piece of equipment gets damaged, a policy with ACV would reimburse you only for the depreciated value of the machine. This is a coverage gap you might not notice on your own, but it’s one that an experienced independent agent would bring to your attention.

Do - Inform your independent agent about changes in your business. Success is a two-way street. It’s great when your business grows, but you have to remember that your insurance coverage must grow, too. The more your operation expands, the more vulnerable you are to risk. This is why it’s important to meet regularly with your agent and keep them updated about all the continual changes in your business.

Don’t - Assume hackers won’t target your business. Nearly half of all commercial cyber-attacks target small businesses, which can be costly. However, many small-business owners still assume that, because their work is not directly associated with the digital world, they don’t have to worry about cyber insurance. Why would hackers attack a small plumbing business? The answer is simple: because small businesses are easy targets. The reality is that large corporations have extremely sophisticated cybersecurity operations, while small businesses usually have none.

A person is typing on an open laptop.


Maybe you don’t conduct any business online, but if you store any personal information on a computer, and that computer is connected to the internet, you are open to an attack. Remember, if any personal or financial information is stolen from an employer’s network, the employer is liable. Commercial cyber insurance from a reputable insurer is an essential part of doing business in the 21st century.

*Products referenced may not be approved/available in all states. Limitations and conditions may apply. Premium will be based on benefits chosen and policy rates available at time of application.

Disclaimer: This article is not expert advice. The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Discounts may not be available in all states. Limitations and conditions may apply. Premiums will be based on benefits chosen. Please check with your local Independent Auto-Owners Insurance Agent for details."

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