Updating your insurance as your business grows
It can be rewarding for business owners to watch their establishments flourish over time. Such success makes all the hard work that goes into running a business worthwhile. Nevertheless, as businesses grow and evolve, their commercial insurance needs and risk management considerations will follow suit. Many scenarios can give businesses reason to revise their business insurance coverage, whether due to expansion, property updates, workforce adjustments or industry-specific changes.
Some circumstances will require more than just increasing existing policy limits upon renewal— they may need new or additional forms of coverage. Yet, many business owners don’t take the time to revise their insurance selections when changes occur, resulting in coverage gaps. In fact, an estimated 75% of U.S. businesses are underinsured by 40% or more.[1]
With this in mind, it’s critical that businesses ask: What types of business insurance do I need? Failing to do so can lead to elevated exposures and financial concerns when the unexpected happens. Here are some best practices to help businesses successfully navigate commercial insurance coverage revisions over time.
Getting started
Before making insurance adjustments, it’s important for businesses to understand how the coverage selection process begins. Most business owners are mindful of costs when opening and are busy maintaining smooth operations. As a result, new businesses often can’t allocate much time toward risk management programs or selecting comprehensive insurance solutions.
These businesses usually uphold informal risk management efforts, focus on required coverage, and decline additional offerings. Specifically, many start with a business owners policy (BOP)—a bundled insurance package that includes commercial property, general liability, equipment breakdown, and business income coverage.
Businesses are typically eligible for BOPs if they have fewer than 100 employees and generate less than $5 million in revenue.[3] These packages are ideal for small- and medium-sized businesses seeking comprehensive, affordable protection. However, note that workers’ compensation insurance—required in most states for any business with employees—is not included within a BOP.
Knowing when to make insurance adjustments
Some businesses can remain protected under a BOP for their lifetime. However, those that experience expansion early on will likely outgrow these packages once they surpass eligibility requirements.
As businesses increase profits, stabilize financially, and expand operations, it becomes increasingly important to strengthen risk management procedures and update commercial coverage to protect growing assets. Even if still eligible for a BOP, additional customized coverage may be needed. Businesses should review their insurance when:
- Hiring employees — Most states require workers’ compensation once you hire your first employee. As your workforce grows, review compliance standards and consider employment practices liability insurance (EPLI) to protect against claims of wrongful termination, harassment, or discrimination.[5][6]
- Conducting property renovations — Property updates like expansions or equipment installations can increase property value. Make sure property coverage reflects these changes to prevent underinsurance.
- Moving or adding locations — New or multiple properties require updated commercial property insurance. Coverage should account for size, value, and regional risks of each location.
- Adding vehicles — Once a business owns vehicles, it must carry commercial auto insurance. Update this coverage whenever adding vehicles, and establish a driver safety program to mitigate risks.
- Working with third parties — Partnerships with subcontractors or suppliers may require additional liability coverage or contractual risk transfer to protect your business from third-party exposures.
- Offering new products or services — Expanding offerings can change your liability profile. Consult your insurance agent to determine if you need specialized coverage.
- Implementing digital operations — Digitization increases cyber risk. Strengthen cybersecurity and consider cyber liability insurance to protect against breaches and data losses.
- Forming a board of directors — If your business adds a board, obtain directors and officers (D&O) coverage to protect leadership from liability claims.
In addition to updating coverage during growth, it’s also important to revise policies during downsizing. Businesses should notify insurers when reducing staff, selling properties, or discontinuing offerings to adjust coverage accordingly. Update policies to reflect ownership or management changes promptly to ensure accuracy.
Utilizing the right resources
Coverage needs vary by industry. Some sectors have specialized requirements or thresholds tied to growth milestones. For instance, a restaurant expanding its cold storage capacity may need additional coverage for food spoilage losses.
To better understand current and future coverage needs, businesses should consult:
- Trade associations and industry groups for sector-specific requirements.
- Experienced safety and risk management professionals.
- Qualified insurance professionals, such as independent agents or brokers.
- Peers and business owners within their industry for practical insights.
Maintaining adequate commercial insurance is a continual process. Though it may seem complicated to make policy changes over time, ensuring complete protection at every stage of growth is essential for long-term success.