Insureon Blog

5 Business Insurance Mistakes Costing You Money

15. October 2014 08:01

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As a small-business owner, chances are you’re always on the lookout for ways to trim the fat from your budget. But when it comes to your business insurance, you may not be looking in the right place.

Fear not. Here’s a rundown of the top five costly mistakes small-business owners make when it comes to their coverage and ways to ensure you don’t make them.

1. Using the Wrong Classification Codes for Workers

This mistake affects your Workers’ Compensation Insurance premiums. But before we delve into the issue, let’s first get on the same page about what a classification code is.

Employee classification codes are part of a system used to determine the cost of Workers’ Compensation Insurance. Here are the takeaways:

As you might have guessed, the logic behind this system is that some professions are more hazardous than others. The higher risk the job is, the more you can expect to pay for coverage for that worker. For example, covering a construction worker is going to cost your business more than covering a secretary. The construction worker simply faces more risk of serious bodily injuries while working.

Now that we have that straightened out, here’s the issue: if you use the same classification code for all your employees, you may be overpaying for your Workers’ Compensation coverage. For instance, if you run a restaurant, you wouldn’t want to classify all your workers as kitchen cooks if you also have clerical staff. The clerical code assigns a lower rate.

You can read more about how to properly classify workers in the post “How Do I Use Workers’ Compensation Class Codes?

2. Misclassifying Independent Contractors as Employees – Or Vice Versa

Sometimes, the line between independent contractors and employees can get confusing – especially if you rely on the same independent contractor for long-term work. But it’s worth educating yourself because…

There’s no hard-and-fast way to distinguish between the two types of workers. However, independent contractors usually have free rein over the manner in which they complete their work. That means they set their own schedules, except for deadlines. They usually provide their own tools and supplies for the work at hand, and they have the freedom to work for other clients.

Read more about the difference between independent contractors and employees in the post “This Common Mistake Can Cost Small Businesses Thousands.”

3. Not Updating Your Insurance Plans

When your business experiences a major change, it affects all aspects of your business – including its insurance policies. If you don’t update your policies to reflect significant decreases in income, you could be paying too much for coverage you no longer need.

By contrast, if your business takes off and you start making money hand over fist, you may need to adjust your policy limits so you’re not underinsured when something goes awry.  

In general, check in with your insurance agent to update your policies if your business…

4. Paying for Policies Your Business Doesn't Need

Is there anything more disheartening than spending your hard-earned cash on something useless? At insureon, we’ve seen it happen with far too many of our customers before they started working with us.

It’s not that other insurance agencies are evil. It’s just a matter of them not understanding the nuances and risks that come with different industries.

That’s why it’s always best to work with an agent who…

For more tips on cutting down your insurance spending, check out our blog series on insurance saving tips.

5. Not Implementing Risk Management Strategies

Did you know that some risk management measures can lower your insurance premiums? Though every insurance provider has its own criteria, many take into account the following preventative strategies when calculating your premiums:

Be sure to talk to your insurance agent about the safety measures you can implement that could reduce your insurance rates.

Tags:

Insurance Savings Tips | Small Business | Tips for All Small Businesses

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