Is your business underinsured? Here's how to know

Buying insurance when you start your business is a smart decision. After all, you never know when something unexpected could happen – like a lawsuit, claim, or data breach. But your business has probably grown and changed since you first started. Here’s why your business insurance should keep up.

The 2023 Hiscox Underinsurance Report surveyed 1,000 small business owners (with 50 or fewer employees) to determine whether they are properly protected. Here are some of our findings.

Many small businesses are growing

Nearly half (47%) of small businesses have seen an increase in their revenue since 2021. About a third (32%) experienced a decline in their revenue. Those whose revenue is up may now be underinsured, while those whose revenue is down may be paying more for their insurance coverage than they have to.

Types of coverage are mixed

There are different types of business insurance, and each type protects against different things. Many businesses should have more than one type of policy, depending on the risks they face. We asked about four of the most common types of policies.

General liability insurance

General liability insurance is the foundational coverage that nearly every business needs. It protects against third-party claims of bodily injury, property damage, and personal injury. We found that 65% of small businesses have general liability coverage.

Pro tip: If you see clients or vendors face to face, or if you advertise your business, you should have general liability coverage.

Property insurance

If you have tools or equipment you need to do your work, or if you rent or own the space where your business operates, property insurance can protect your business property. Fewer than half (45%) of the respondents to our survey have property insurance.

Pro tip: A business owner’s policy (BOP) provides general liability coverage plus coverage for your business property, so if you have tools and equipment or business premises to protect, choose a BOP instead of general liability.

Related: General liability or professional liability insurance?

Workers compensation insurance

Businesses that have employees are nearly always mandated to have workers compensation insurance coverage to pay medical costs and lost wages if a worker is injured or becomes ill on the job. Just over a third (35%) of the businesses we surveyed have workers compensation coverage.

Pro tip: Check the workers compensation requirements for your state. There are hefty fines for non-compliance.

Professional liability insurance

A business can be sued for just about anything, and even an unfounded lawsuit can be expensive to defend. Professional liability (also called errors and omissions or E&O) insurance covers defense costs and a settlement or judgment if you’re sued for negligence. Just 32% of businesses we surveyed have this important protection.

Pro tip: If you provide advice to clients, consider professional liability coverage.

Reasons and ways to purchase

Two-thirds (68%) of business owners sought out insurance coverage because they were concerned about potential claims. (Smart!) One in five (20%) made the purchase because a partner or vendor required it.

Business owners seek out multiple ways to learn about and purchase insurance coverage. More than half (56%) look to agents and brokers for information, while slightly fewer (44%) find insurance company websites to be helpful.

Most business owners (70%) purchase through an agent, likely due to their expertise. Under a third (29%) purchased their coverage online.

Is your business adequately insured?

Three-quarters (75%) of businesses don’t have sufficient insurance. You can make sure yours does by taking these steps.

1. Do your research, either online or by talking to an agent, to determine what you need. If you’re not sure, you can find out here, or by calling 1-866-283-7545 and speaking with one of our licensed advisors.
2. Describe your business accurately so you’ll get the right coverage and be protected if the unexpected happens.
3. Review your coverage regularly – at least every two years, or when your payroll or revenue changes by 20% or more in either direction.

Want more information on making sure you have the right insurance and enough of it? Download our report here.