Costly Business Insurance Mistakes to Avoid This Tax Season

Tax season is a critical time for every business owner. Compiling receipts, reconciling accounts and preparing financial statements are not an easy task to handle. Sometimes it’s very difficult for businesses to maintain their business insurance besides maintaining all other business expenses. They may overlook their business insurance also. This may create huge problem not just in terms of money, but also in legal exposure and peace of mind. As you get your financials in order this tax season, be sure to avoid these common business insurance pitfalls.

1. Failing to Review and Update Your Insurance Policies

Business experiences many changes throughout the year. Changes in equipment, expansion of business premises or hiring new employees happens throughout the year. To cope up with these changes you need to review your insurance policies annually. Check business insurance coverage and ensure that it meets your business’s true needs. Underinsured businesses risk significant out-of-pocket costs if a claim arises.

What to do:

You should review your current policies before filing taxes. Check for changes in revenue, staffing, inventory or operations and ensure that your coverage matches your current risk profile. If you have any doubts then don’t hesitate to discuss with your insurance broker.

2. Missing Out on Tax Deductions for Premiums

Many business owners don’t even know that most business insurance premiums are tax-deductible. Failing to claim these deductions means you’re essentially leaving money on the table.

What to do:

Consult your accountant to identify which insurance premiums are deductible. Generally premiums paid for property, liability, professional indemnity and even cyber insurance often qualify for tax deductions. Make sure you keep thorough records and receipts for all policies.

3. Overlooking Required Insurance

Depending upon your business and location some types of insurance are legally mandatory. For example, employers’ liability insurance is a legal requirement in the UK if you have employees.

What to do:

Double-check your legal insurance obligations based on your business sector and location. If you are not sure then please consult with your insurance advisor or local business authority immediately.

4. Ignoring Policy Exclusions and Limits

When was the last time you checked the details of your insurance policies? Many business owners think their insurance covers everything, but they often find out after making a claim that some things are not included.

What to do:

Read carefully all of your insurance documents and take a look at what is not covered. How much you have to pay yourself. If you notice anything important that isn’t covered, think about adding extra coverage or getting another policy to fill those gaps.

5. Neglecting to Insure Business Interruption

Business interruption insurance helps pay for lost income and expenses if you have to close your business for a while because of something like a fire or flood. Many small businesses don’t buy this insurance to save money. But it’s always recommended to have business interruption insurance to combat with the accidental losses.

What to do:

Think about how closing your business for a short time could affect your money. Even a brief shutdown would cause you to lose a lot of money. Therefore getting business interruption insurance is must.

6. Not Accounting for Remote Work Risks

Many businesses now have employees who are working from home. However, letting people work from home can bring new problems like online security risks or not having enough insurance for equipment used outside the office.

What to do:

Think about adding or increasing cyber insurance to protect your business from online attacks and data leaks. Make sure that your insurance policy covers the equipment your employees are using while working from home.

7. Letting Policies Lapse

Money can be tight during tax season. But it’s very risky to let your insurance end, even for a short time. If something happens while you aren’t insured, it could end up costing you much more than just paying the insurance bill.

What to do:

Set reminders for when your insurance needs to be renewed, and try to save some money to pay for it. Some insurance companies also let you pay in smaller amounts over time to make it easier.