Finding low-cost insurance for your company or profession can be daunting, but with the help of a business insurance broker, the task is less onerous.
However, a business insurance policy that lapses, expires, or is cancelled by a provider can leave you uninsured and exposed to paying for costly damages or lawsuits on your own. Should it happen to you, it can make getting a new policy difficult and more expensive.
A few things can trigger a lapse in your business insurance policy, including:
Learn everything you need to protect your small business.
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Jon Hogg August 19th, 2024 |
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Running any business without insurance protection is extremely risky and can lead to many unpleasant scenarios, such as:
When a liability insurance policy lapses or is cancelled, the business loses its protection against various liability claims. That means that if a third party (such as a customer, employee, or vendor) files a lawsuit or claim against the business for bodily injury, property damage, or other covered liabilities, the business owner will have to bear the costs of defence and any potential settlement or judgment out of pocket.
Without liability insurance coverage, the business owner may be liable for any damages or losses incurred due to a covered claim. That could risk the owner’s assets, such as their savings.
Defending against a lawsuit can be expensive, even if a business owner is not at fault. Legal fees, court costs, and related expenses can quickly add up without insurance.
A liability claim or lawsuit, even if unfounded, can harm a business’s reputation. Customers, suppliers, and partners may lose trust in your company, leading to declining revenue and opportunities.
Many customer or partner contracts you sign require your business to maintain specific insurance coverage. If the policy is cancelled or lapses, you may be in breach of contract, leading to legal issues or financial penalties.
Some industries and professions have legal or regulatory requirements mandating they carry liability insurance. Failing to maintain proper coverage can result in fines, penalties, or even a business licence suspension.
Your clients may require you to provide a valid certificate of insurance (COI) , or they won’t hire or do business with you. That can lead to losing out on potentially lucrative customer contracts.
If your business is forced to close temporarily due to damage to your commercial property and inventory, without business interruption insurance , your ability to pay your overhead costs and continue to operate can be threatened and may lead to significant financial strain and possible bankruptcy.
If your insurance policy lapses, expires or is cancelled, it’s critical to take immediate action to address the issue. Among the steps you should take include:
Contact your insurance broker right away to confirm the reason for the lapse or cancellation and find out if it can be reinstated or if you can get a new policy. A Zensurance broker can help if you have difficulty getting a new policy.
Discover the period during which your company was operating without insurance. It will help you understand the potential risks the business may have been exposed to during that time.
If any urgent matters or potential liabilities arise during the coverage gap, take action to mitigate them. If necessary, seek legal advice from an experienced lawyer.
Work with your broker to get a new liability insurance policy immediately. Although a lapse in coverage can create issues getting reinsured, obtaining coverage may still be possible even after a lapse or cancellation.
Assess your insurance needs to ensure the new policy provides adequate coverage. The coverage limits and policy features should be tailored to your business’s specific needs.
If the lapse or cancellation affected any contracts or agreements that required liability insurance, promptly inform the relevant parties of the renewed coverage.
Identify the reason for the lapse or cancellation and take steps to prevent it from happening again. For instance, if you were late making monthly premium payments, talk to your broker about how you can change your payment plan so it doesn’t occur again.
Keep employees, partners, and stakeholders informed about the situation, and let them know once you have new insurance coverage in place.
Here are four ways you can prevent a lapse in your business insurance coverage:
Work with an experienced broker who understands the specific insurance needs of your business. They can provide guidance on policy options and keep you informed about any changes or updates related to your policy.
If you pay your insurance premium monthly , arrange for automatic withdrawals from your bank account to help ensure payments are made on time. It also makes it easier to maintain your budget and track what you paid and when.
Be aware of any legal or regulatory requirements related to insurance in your industry or profession and comply with them to avoid potential penalties or fines.
Don’t wait until the last minute to renew your policy. You’ll typically receive a notice 30 to 60 days before your existing policy is due for renewal. Starting the renewal process sooner rather than later gives you time to address potential issues. During the renewal process, if there are any changes to your operations, let your broker know so they can adjust the policy accordingly and maintain your coverage.
