5 common insurance mistakes businesses should avoid.

This article was originally published on May 23, 2025.

Every business should have insurance for the risks it faces. Without adequate coverage, a company can find itself facing a large expense if it gets sued, suffers property damage, or experiences other unexpected incidents. But it’s important to be careful as you research and buy coverage. If you rush through the process, you can make any of several common insurance mistakes and end up with coverage that doesn’t meet your company’s needs. 

This article discusses five insurance mistakes many small businesses make so you can be sure to avoid them. We want you to have the robust financial protection your company needs. Let’s go! 

Why business insurance and risk management are essential.

Before diving into common insurance mistakes, it’s important to consider why business insurance is so important. In short, it’s essential because every business faces risks no matter how carefully it operates.

Some things, like the weather, are simply outside your control. Even when things are within your control, people make mistakes. Consequently, the chance of an unexpected event is always out there.

Common business risks include:

• Property damage. Fires, floods, vandalism, and other incidents can damage or destroy business property, including buildings, equipment, and inventory.

• Liability claims. Businesses can be held liable for damages or injuries caused to property or people like customers, clients, vendors, or visitors.

• Employee injuries. It’s not uncommon for workers to get hurt or sick (or, in rarer cases, die) due to on-the-job incidents.

• Data breaches. Hackers are constantly working to get past companies’ digital defenses and steal valuable data.

These and other vulnerabilities make having both insurance and strong risk management practices essential.

Examples of business insurance claims.

How do the risks described above play out in the real world? Here are a few examples:

• A customer slips and falls in a retail store, suffering a serious injury and suing the business.

• A fire damages a restaurant, halting operations for several weeks.

• A company's computer network is hacked, resulting in the theft of customer data.

• An employee is injured while operating machinery in a warehouse.

• A delivery driver causes an accident while on company business, and the other party sues.

We hope incidents like these never affect your business. Still, risk management and insurance coverage are essential. We also encourage you to review the information below on business insurance mistakes to avoid.

Insurance mistakes you should avoid.

Business insurance can seem complicated and confusing at first. But once you do a little research, you’ll find it makes sense and that there are really just a handful of mistakes you need to be aware of and avoid.

These are the 5 most common mistakes with business insurance:

1. UNDERESTIMATING COVERAGE NEEDS.
Business owners often underestimate the amount of coverage (meaning the coverage limits) their company needs. Businesses should carefully assess their risks and ensure they have adequate coverage to protect against potential losses. This includes considering factors like the value of their assets, potential liability claims, and the cost of business interruption.

2. OVERLOOKING IMPORTANT COVERAGE
Understandably, many businesses focus on coverage like basic Property and General Liability insurance. Those are often the first risks that come to mind. But protection from Cyber Liability and Professional Liability may also be important for your business. In other words, you need to be sure you have comprehensive coverage.

3. FAILING TO UPDATE COVERAGE.
As businesses grow and evolve, their insurance requirements change. It's crucial to review your coverage regularly and update it as needed to align with your current operations and the risks you face. This includes adding or removing coverage, adjusting coverage limits, and updating policy information.

4. NOT UNDERSTANDING POLICY EXCLUSIONS.
Insurance policies contain what are called exclusions. These are specific events or circumstances that a policy doesn’t cover. It's crucial to carefully review your policy and understand any exclusions to avoid surprises. The last thing you want is to experience an incident you thought would be covered and then learn it isn’t.

5. CHOOSING THE CHEAPEST OPTION.
Protecting your business is about more than just having insurance. It’s about having the right insurance. Cost is definitely important to business owners, but it shouldn't be the primary factor in your purchase decision. It's essential to prioritize comprehensive coverage and choose a policy that adequately protects your business, even if it costs a little more.

With this helpful insurance advice in mind, you can get coverage that addresses the risks you face and provides the financial protection needed to deal effectively with unforeseen incidents and keep your business moving forward.

Who relies on THREE for business insurance?

We work with all types of business professionals, assisting them in getting coverage.

New business owners turn to us for insurance advice and explanations of the coverage basics. What risks does a business like mine face? How does a policy from THREE protect me? What coverage limits should I have? Getting answers to critical questions like these empowers them to avoid common oversights and ensure their businesses are shielded from unexpected expenses.

We’re also here for managers and other decision-makers. They trust us to provide guidance on how much coverage to carry since being underinsured can be costly. That’s especially important as their businesses grow and change. We help ensure their financial protection evolves with them.

Individuals and companies that provide professional advice or services are another group we work with. They have many of the same needs as other businesses but with the addition of potential professional liability (errors & omissions) lawsuits. Our team explains THREE’s Professional Liability coverage and how it protects them from the consequences of actual or alleged mistakes.

The many benefits of THREE’s whole-business coverage.

One way to avoid common business insurance mistakes is to make sure you understand what's protected. THREE makes this easier by bringing coverage for your people, property, and operations together in one clear policy, helping reduce the complexity and potential coverage gaps that can come with managing multiple policies.

With THREE, you get:

• Broader protection for your business. THREE's policy brings together essential coverages, including Business Liability, Property, and Workers' Comp where available, helping protect more of your business in one place.

• A clearer picture of what's covered. Our policy is written in plain English, making it easier to understand your coverage, limits, and exclusions.

• Easier policy management. Manage your insurance with one policy, one bill, and one renewal date, plus 24/7 access to My THREE Online.

• Protection you can count on. Backed by Berkshire Hathaway, THREE combines A++ (Superior) financial strength with dedicated claims support when you need it.

Final thoughts on common insurance mistakes.

Avoiding common business insurance mistakes starts with understanding your risks, choosing the right coverage, and knowing exactly what's protected. Taking these steps can help reduce unexpected financial losses and give you greater confidence in your business insurance.

THREE makes protecting your business easier by bringing broader coverage together in one clear policy, backed by the financial strength of Berkshire Hathaway.

If you have questions about business insurance, contact us at 1-800-507-4495, Mon.–Fri. 8am–8pm ET.