If the historians are right, the earliest written insurance policy was issued about 4,000 years ago. Despite the centuries since, employers buying insurance today can still sometimes find themselves as at-risk as any Mesopotamian stone mason.
One of the biggest mistakes companies make in their insurance buying practices is in failing to thoroughly assess their risks and needs. This can lead to various issues, such as inadequate coverage, incorrect policy types, or paying for unnecessary coverage. With all that in mind, here are six common mistakes we see companies make in their insurance buying practices:
- Underestimating risk exposure: Companies may not fully understand the extent of their risk exposure, leading to insufficient coverage. It's essential to assess all your potential risks and ensure that the policies purchased cover all insurable facets of your business.
- Not regularly reviewing policies: Insurance needs can change over time as your company grows or its operations evolve. Companies should periodically review their policies to ensure that their coverage remains appropriate for their current situation.
- Inadequate coverage limits: Companies sometimes select low coverage limits to save on premiums, but this can lead to significant financial loss if a claim exceeds the policy limits. It's important to choose coverage limits that adequately protect your business from potential losses.
- Overlooking policy exclusions: Insurance policies often come with exclusions, which are specific circumstances under which the policy will not provide coverage. It's important to be aware of these exclusions and consider additional coverage if necessary.
- Failing to understand policy terms and conditions: Companies should read their policies carefully and ensure they understand the terms and conditions, including their responsibilities and the insurance company's obligations. This can help prevent misunderstandings and disputes down the road.
- Failing to update insurance policies after major changes: When a company undergoes significant changes, such as a merger, acquisition, or change in operations, it's essential to reassess insurance needs and update policies accordingly. Failure to do so can lead to gaps in coverage or even the denial of claims.
By avoiding these mistakes and working closely with an experienced insurance professional, companies can ensure they have the appropriate coverage to protect their assets and operations.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.