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The Risks of Starting and Stopping Coverage

Some small-business owners ask, "can't I just start and stop coverage as I need it?" The idea is that they could stop coverage when they don't expect to need protection and save some money. In the future, they could start coverage when they felt they needed it.

The problem with this is fairly obvious. No one can anticipate when they'll need coverage for a lawsuit. That would require you to see the future. If you could do that, you probably wouldn't be worried about insurance. You'd have cashed in a winning lottery ticket and would be drinking Mai-Tais on a beach in Bermuda.

It's a natural impulse to try to save money on business insurance, and that's why savvy business owners prioritize their policies and take advantage of risk management techniques to limit their exposure to the kind of situations that could cause a lawsuit.

Another problem with shutting off your insurance coverage to save money is that some policies require you to have continuous coverage. As we saw with Errors and Omissions Insurance, when a policy lapses, you can lose coverage for any and all professional errors you made in the past.

What's worse, most insurance companies take a negative view of businesses that start and stop coverage. If you cancel and restart policies over and over, you may have difficulty finding coverage when you need it.

Next: The Takeaway: Essential Facts to Know about Business Insurance

70% of businesses raise prices or cut hiring when sued