If you face a temporary closure of your business or find it difficult to pay the monthly premiums, you may think of canceling your small business insurance policy or specific coverages from your policy to save money. However, before making a final decision, you must think of the consequences and their impact on your business and your finances in the long term.
Reasons Why You Must Reconsider Canceling Your Small Business Insurance Policy
Here are the reasons you shouldn’t cancel your small business insurance:
- Increased exposure to financial risks
Canceling certain coverages or the policy altogether leaves your business completely vulnerable to risks. While you may think that you will save money on the premiums, in the event of damage or loss to your uninsured assets, you may end up paying much more from your pocket. In certain cases, the resulting expenses can spell financial disaster for your company.
- Higher costs for new insurance coverage
If you plan to buy new insurance once your business is financially more stable, the cost of doing so may be much higher. Due to the cancelation of the insurance and the subsequent lapse in coverage, your insurance provider may charge you higher premiums than before.
- Reduced refund amount
On cancelation, your insurance provider may refund the balance premium amount on a prorated basis, but if your policy has a minimum earned premium clause, you may still have to pay a percentage of the total premium.
- Risk of losing your license
The business license that you need to operate your business requires you to have insurance coverage. If you cancel your insurance, you may be at risk of forfeiting your license, which may hurt your business reputation.
- Default on leases and contracts
Your business operations may include the signing of leases and contracts with your clients and partners. They may terminate the leases and agreements due to a lack of insurance coverage at your end.
- Chances of losing your business property
For leased properties, your landlord needs you to have adequate insurance, or they can end the lease agreement. Also, the property, if shut down temporarily, can attract vandals and thieves for which you will have no protection.
- Payment for damage to your business vehicles
Your personal auto insurance may not cover losses or damage to your uninsured business vehicles, and you may have to incur the entire amount from your resources.
- Payment of outstanding loans
If you have unsettled debts, you may find yourself as a loan defaulter even after paying your installments because of your uninsured status.
- Policy terms and conditions
You may have to give a notice period before the cancelation of your policy. However, you need to pay the premium during this period. If you don’t, your credit score may be affected.
- Coverage adjustment options
You may explore options to reduce your premiums rather than canceling your insurance.
Secure Your Small Business with Leland Smith Insurance
If you want to learn more about how you can adjust your small business insurance premiums based on your current financial condition without canceling your policy, contact our team today. At Leland Smith Insurance Services, we can help you get the right coverage tailored to provide maximum coverage for your unique needs.