Did you know that 75% of small businesses are underinsured? Many business owners believe they have adequate coverage—until an unexpected claim arises. Whether it’s a lawsuit, property damage, or an unforeseen disruption, the lack of sufficient insurance can lead to devastating financial consequences.

Underinsurance can happen for many reasons, from underestimating risks, to failing to update policies as the business grows, even inflation. At Relation, we are here to help you assess whether your business is properly insured and provide steps to close any coverage gaps.

What Happens If My Business Is Underinsured?

If your business is underinsured, you risk not having enough coverage to fully protect your company in the event of a claim. Resulting in a shortfall between what your policy covers and what your actual financial exposure is. Common reasons businesses end up underinsured include:

• Failing to update coverage as the business grows.
• Underestimating the value of assets, property, or potential liabilities.
• Choosing minimal coverage to save on premiums.
• Not considering emerging risks, such as cyber threats.
• The cost to replace assets due to rising inflation costs.

If you haven’t reviewed your policy in the last year, your business may already be at risk.

Signs Your Business Might Be Underinsured

Inadequate Liability Limits

Liability insurance is essential for protecting against lawsuits, but many small businesses don’t have high enough limits. If your policy only covers $500,000 in damages but a lawsuit results in a $1 million judgment, your business would be responsible for the remaining $500,000. In industries where legal claims are common, such as construction or retail, low liability limits can be financially disastrous.

Lack of Cyber Insurance

With cybercrime on the rise, having cyber liability insurance is no longer optional. Data breaches, ransomware attacks, and phishing scams can cost businesses thousands—or even millions—in damages. Yet, many small business owners assume that a general business policy covers cyber threats, which is often not the case.

No Business Interruption Coverage

Natural disasters, fires, and even supply chain disruptions can bring operations to a halt. Without business interruption insurance, companies may struggle to pay rent, salaries, and other expenses while recovering. This type of coverage helps replace lost income, ensuring that your business stays afloat during an unexpected shutdown.

Insufficient Property Insurance

Your business property—whether it’s an office, storefront, or warehouse—faces risks such as fires, floods, theft, and vandalism. However, many business owners assume their existing property insurance covers all damages, only to find out after an incident that they don’t have enough coverage.

Common issues with property insurance include:

• Coverage limits that don’t reflect current market values.
• Exclusions for natural disasters like flood, earthquakes or hurricanes.
• Failure to include coverage for equipment, inventory, or outdoor signage.

Underestimated Replacement Costs

Inflation and rising construction costs mean that rebuilding a damaged property or replacing equipment could cost far more than what your policy covers. Many businesses rely on outdated valuations, leaving them with insufficient funds when they need to rebuild.

How to Reevaluate and Strengthen Your Business Insurance

One of the best ways to ensure your business is properly insured is by performing a coverage audit. This involves reviewing your existing policies, identifying gaps, and determining whether your coverage aligns with your current risks.

Key questions to ask:

• Do my policy limits match my business’s revenue, assets, and liabilities?
• Am I covered for emerging risks like cyberattacks?
• Do I have the right endorsements for my industry?
• Does my current policy reflect inflation and market changes?

Work with a Trusted Insurance Partner

Businesses evolve, and so should their insurance coverage. Whether you’re expanding, hiring more employees, or adding new services, your risk profile changes over time. Regularly reviewing your policy with a trusted insurance broker ensures you remain fully protected as your company scales.

At Relation, we know insurance policies can sometimes feel complex, and it’s easy to overlook important details. When you work with Relation, we are proactive about your risk. Our team of experts regularly checks in on our clients to help with:

• Analyze your current policy and suggest necessary adjustments.
• Compare options from different providers to find the best coverage.
• Ensure you’re not overpaying for unnecessary coverage while still protecting your business.

Let Relation help you change the way you look at insurance. Find a location near you and contact us today!