Top 5 Common Business Insurance Mistakes and How to Avoid Them

Most business owners don't think about their insurance until they need to make a claim. And that's exactly when the mistakes show up.

The problem isn't usually a lack of insurance. It's the wrong insurance, not enough of it or cover that hasn't kept up with how the business has grown. These mistakes are common, they're avoidable and they can be seriously expensive.

Here are the five we see most often.

Mistake 1: Underinsuring Your Assets

This is the big one. Underinsurance happens when the sum insured on your policy is lower than the actual value of what you're protecting. It might be because you set the value years ago and never updated it, or because you estimated instead of calculated.

When you make a claim, insurers can apply what's called the underinsurance clause. This means they'll only pay out a proportional amount based on how underinsured you are. So if your assets are worth $500,000 but you're only insured for $300,000, you might only receive 60% of your claim. Even if the damage is total.

The fix is simple. Get an accurate valuation of your assets and update it regularly, especially after significant purchases or renovations.

Mistake 2: Assuming ACC Covers Everything

New Zealand's ACC scheme is a great system but it has limits. A lot of business owners assume it covers all workplace injury claims and leave it at that. It doesn't.

ACC covers physical injuries but it doesn't cover illness, mental health conditions or claims where an employee argues your negligence caused their harm in ways outside the ACC framework. Employers' liability insurance fills those gaps and without it, you're exposed to claims that could cost your business significantly.

Mistake 3: Not Having Business Interruption Cover

Property insurance protects your assets. But if a fire, flood or major event shuts your business down for weeks or months, property insurance won't replace your lost income. That's what business interruption insurance is for.

A lot of businesses skip it to save on premiums and then find themselves in serious trouble when they can't operate. Fixed costs like rent, salaries and loan repayments keep coming whether you're trading or not. Without business interruption cover, you're funding all of that out of pocket while also trying to rebuild.

Mistake 4: Using Personal Insurance for Business Activities

This one catches people out more than you'd think. Using a personal vehicle for business deliveries, working from home and assuming your home contents policy covers your business equipment, taking on a client job under your personal name rather than a business entity. All of these can void your claims.

Personal insurance policies are written for personal use. The moment business activity is involved, the insurer has grounds to decline. Always make sure your business activities are covered under business-specific policies.

Mistake 5: Set and Forget

Insurance isn't something you sort once and never think about again. Businesses grow, change and take on new risks all the time. New staff, new equipment, new services, new premises. Each of these can create gaps in your existing cover if your policies aren't updated to reflect them.

The businesses that get caught out are usually the ones that took out a policy years ago and assumed it still fits. An annual review with your broker takes an hour and can prevent a very costly surprise.

Final Word

These mistakes are easy to make and easy to avoid with the right guidance. The goal isn't to have the most insurance. It's to have the right insurance for where your business actually is right now.

If you're not confident your current cover stacks up, talk to the team at Long Burroughs. We'll take a look and tell you straight.