Are You Protected Against the Most Common Business Insurance Claims?

If everything has been smooth sailing for your business so far, then that’s great! We’re happy for you! We don’t want to drag you down, but we do need to remind you that sometimes things go wrong, which is why you need to stay on top of your commercial insurance policies. Thinking that you’ll probably never have to use your insurance policies, or that the cost of premiums isn’t worth it could be a huge mistake. Property and liability claims are more common – and more costly – than you might think. 

insurance claim form with a caucasian hand holding a pen to it
40% of small businesses will incur a property or liability claim in the next 10 years

The Study

How do you view business insurance? As a rarely used, just-in-case kind of thing that you would only ever need under extraordinary circumstances? Well, you might be surprised to find out that, according to a study done by financial services company The Hartford, 40% of small businesses will incur a property or liability claim in the next 10 years. 

To get to that number, The Hartford analyzed claims data from over 1 million policies purchased by small business owners over 5 years. In their study, they also looked at “claim frequency” and “claim severity” – or, in other words, how likely a loss is to occur and how much it is likely to cost. These two things seem to be on opposite ends of the spectrum. For example, a cleaning business might be very likely to incur multiple, small claims. On the other hand, a construction company might complete hundreds of jobs without incurring a “struck by object” claim – but, if they did, it would probably end up costing thousands of dollars. 

The Most Common Claims

Let’s get down to it. What did The Hartford find were the most common claims, and what percentage of business were affected by them in the 5 years of their study? According to their study, these are the 10 most common claims:

  • Burglary and theft (20%) To protect your business against being ripped off by outsiders or even employees, consider installing an alarm system or a gate and adequate lighting; consider also implementing background checks for employees. And make sure your insurance includes coverage for theft
  • Water and freezing damage (15%) Burst pipes happen. Pipes can also freeze in winter, so make sure to keep your workplace warm enough, and shut off the water supply when not in use. If you’re concerned about flooding due to natural disasters, however, you’ll need to have separate flood insurance
  • building burned down with firefighterWind and hail damage (15%) Mother Nature strikes again. You can’t predict when or if you’ll get hit with a monster storm, but you can take precautions like maintaining the trees on your property, anchoring anything that is outside, and covering windows. If your business is in a hurricane-prone area, make sure you’ve got the right coverage.
  • Fire (10%) Protecting yourself from fire is all about preparedness. Always have a plan, and keep your fire extinguishers in working order.
  • Customer slips and falls (10%) While you can’t stop a storm, you can do your best to prevent accidents at your workplace by simply maintaining a thorough housekeeping routine.
  • Customer injury and damage (5%) Customers can also be injured by things like falling ceiling tiles, so make building maintenance a priority.
  • Product liability (less than 5%) If your product fails in some way, you could be hit with a lawsuit. Consider product liability insurance if your business is merchandise-based. 
  • Struck by an object (less than 5%)
  • car headlight that is damagedReputational harm (less than 5%) Remember the old saying “if you can’t say anything nice, don’t say anything at all?” Keep your criticisms about other businesses to yourself, or you could be hit with a libel or slander lawsuit. 
  • Vehicular accident (less than 5%)

Add these statistics to the 40% of small businesses that will most likely incur a claim in the near future, and you’ve got a very strong case for getting covered. Remember, 5% may sound like a small amount, but there are around 30 million small businesses in the U.S. That means that 1.5 million businesses suffered some of these losses!

The Costs

The Hartford also broke down the costs of these claims. As we discussed early, the severity of the claim and the frequency of the claim were often reversed: reputational harm claims don’t come up very often, but they cost far more than the more common claims of burglary and theft. 

green price tag

  1. Reputational harm: $50,000
  2. Vehicular accident: $45,000
  3. Fire: $35,000
  4. Product liability: $35,000
  5. Customer injury or damage: $30,000
  6. Wind and hail damage: $26,000
  7. Customer slips and falls: $20,000
  8. Water and freezing damage: $17,000
  9. Struck by an object: $10,000
  10. Burglary and theft: $8,000

The bottom line is, The Hartford did a thorough study and came up with numbers that should make any small business owner stop and think. You can take risks to minimize risks, but sometimes they are unavoidable. Your best bet is to make sure you have the proper coverage to protect your business. If you have any questions, or are looking for quotes or a new policy, come to EZ. We’ll give you all the info and find you the best rates – quickly, and for free. You’ve got enough going on, so let us help! To get started simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

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