Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 15 minutes
Key Takeaways
- Rapid business growth can create insurance gaps that lead to severe financial losses.
- Many small businesses operate with minimal insurance, leaving them vulnerable to significant claims.
- Common claims arise from business interruption, liability issues, and cybercrimes, especially in high-risk industries.
- Companies should regularly review and update their insurance coverage to keep pace with growth and prevent coverage gaps.
- Effective risk management includes limiting vendor access and having a clear cyberattack response plan.
5 Things to Remember
While most businesses are eager to expand rapidly, there are risks associated with this kind of success that can bring a business to its knees overnight. Protection gaps in the insurance protecting these businesses can lead to impossibly high claims costs that owners cannot afford to pay out of pocket.
Fast-growth areas in certain metro locations are driving businesses to evolve and grow rapidly, leading to major issues with inaccurate property values, thin vendor certifications, and weak data management. These kinds of oversights can lead to massive losses all due to a single error.
Business income claims are usually related to physical damage but can also be linked to injuries on the job site, weather-related problems, and issues with subcontractors.
The construction, food, and professional services sectors have been the hardest hit in recent months, largely due to a lack of insurance coverage.
There are many things that business owners need to be aware of, such as an increase in weather-related losses across the US, a major uptick in cybercrime, and insurance programs that have reduced the coverage they offer on standard policies.
Why Does This Matter?
In high-growth sectors, loss protection is more important than ever. While the pressures of keeping up with demand and trying to outpace competitors in these busy spaces can draw business owners’ attention away from other factors, insurance protections need to be at the top of the list of priorities on a regular basis.
Insurance coverage helps protect your investment and allows you to keep your business open even if you are sued or during a major weather event that has shut down your county or even your state.
When you have the right commercial insurance in place for your company, you can survive the struggles that are impacting other companies and continue to grow your business in spite of challenges that you might not have predicted.
Working with a skilled insurance company is a must. You need to have a partnership with your insurance provider that gives you advice, guidance, and support when you need it most.
What Shocks Business Owners the Most
USA Business Insurance conducted a review of data collected from 2024-2025. This review revealed several shocking factors that put small businesses across the US at risk.
As many as 40% of small businesses in the US only carried the absolute minimum required insurance. Most businesses were operating with only general liability coverage.
As few as 1 in 3 of these businesses had business interruption coverage. There are so many reasons that this policy type can be a lifesaver, and it can often be bundled into a BOP to keep it affordable.
Cybercrime insurance is still not being adopted fast enough by small businesses all across the US. Many company owners incorrectly believe that they don’t need it if they don’t sell primarily online.
The industries most likely to suffer major losses are often those with the largest insurance gaps. Construction, food service, and professional services providers are rarely sufficiently insured in the US.
While these businesses might look like they are succeeding on paper, all it takes is a single high-dollar loss that falls into a coverage gap for them to be closed down.
What Actually Causes Claims?
One of the primary areas of confusion for business owners is what actually causes losses. Many company owners say they have never had to file a claim, so they believe they never will. The reality is that there are a myriad of things that can cause you to need to file a business claim on your insurance. If you don’t have insurance for the kind of loss that you have suffered, you might not be able to recover.
Business Interruption Losses
One of the primary reasons that business owners are unable to recover from losses is because they don’t have business interruption coverage. This kind of policy allows you to cover operating expenses, payroll, and even relocation expenses if a tropical storm or a major fire makes your regular business location inaccessible.
Being able to keep doing business when things are less than ideal can help you stay afloat as you rebuild.
Liability Losses
Liability exposures are another area where small business owners are often surprised. People with small companies often think that all they will have to do is apologize to a customer and things will be fine. The reality is that damage to someone’s home, a customer slipping and falling over your tools, or a minor safety oversight can lead to thousands of dollars in damages. You need to have the right insurance in place to be able to fix this kind of problem.
Professional Services Disputes
When you offer advice for a living, or if you design things for customers as part of your offered services, you need E&O coverage. This kind of coverage protects you if you are sued by a disgruntled customer. Legal fees are not getting any more affordable these days, and even a small legal wrangle could cost hundreds of thousands of dollars. Legal malpractice severity is on the rise in many locations around the U.S., so having E&O coverage can literally save your company.
Cybercrime and Data Loss
It’s easy to think that you will never be the kind of company that is attacked by hackers. Lots of small businesses think this very thing…and then they suffer a data breach. Even if you accept payments only through your website, you still need cyber liability coverage. This policy will help you hire a lawyer, notify your impacted customers and business partners, and provide credit monitoring services to impacted consumers. You will also get help reporting the breach correctly.
Reasons That Operating Costs and Losses Are on the Rise
There are many factors contributing to costly claims these days. NOAA reports that there have been 27 unique billion-dollar weather-related losses in the US since 2024. Areas that don’t traditionally experience major weather events have also been affected by these losses in recent years.
Power interruptions are an increasingly common concern for U.S. businesses, and long-term outages have been on the rise since the pandemic.
Data breaches and hacking losses are common for businesses of any size these days. Even the smallest company that only collects customer data through a fill-in form on its website is at risk.
Slips and falls and on-the-job injuries haven’t slowed down at all since the pandemic, and even tiny companies with just a couple of employees could suffer losses in the hundreds of thousands of dollars for a single workplace injury.
Digital downtime is another key concern for companies of all sizes and types, as more and more work in the U.S. is done on computers. Even a few days without internet or access to power can bankrupt a company.
Small Losses Can Become Major Problems Fast
When your company is growing and expanding, things can seem to be on the right track for sure. It’s hard to imagine anything bad happening that could impact your success. The trouble that often causes successful, rapidly expanding businesses to shut their doors is that rapid growth means their insurance coverage has lagged behind the business’s true needs.
Large increases in inventory, changes in property values, new operating locations, and increased payroll can all sneak up on business owners. If these alterations to your business operations are not reported to your insurance company and you suffer a loss, you might not have the coverage that you need to cover the damages.
Worst of all, in the case that you have not reported values correctly or if you have forgotten to update your workers’ compensation coverage, you could be fined by various organizations that provide oversight for businesses in the U.S.
If you have accidentally, or even worse, intentionally misclassified your workers, you can suffer major losses that are not covered and be fined to boot. Classifications are important to building out your insurance profile correctly for your industry’s risks. You need to be honest with your insurance agent about the work that you do so that you can be classified correctly. If you look at your insurance information and believe that you are misclassified, you need to reach out to your agent right away.
One of the last major stumbling blocks that frequently impacts U.S. businesses is the assumption that the cloud means you are protected if you suffer a hacking incident, data loss, or network failure. While cloud-hosted backups can be ideal, they are not the primary line of defense against these problems. And in some cases, cloud-hosted services can be the reason that companies are hacked in the first place.
The Industries With the Biggest Gaps and Losses
Construction
Construction tops the list for some of the largest annual losses and some of the riskiest work profiles of any industry in the U.S. Many construction companies are also severely underinsured, leading them to fold up shop on a routine basis for losses that could have been covered by the right insurance products.
Subcontractors without the right insurance coverage, people falling off tall buildings, non-compliance with workers’ compensation regulations, and a variety of oversights lead to construction losses that business owners cannot afford every single year.
You can avoid being one of these statistics by ensuring you create a culture of safety at your worksites. You need to report the training and processes you use to your insurer to ensure you receive any discounts offered for this protocol. You should also ensure that you have POIs on file for all of your subs and that you are a named additional insured when required. Don’t let anyone work for you who isn’t properly insured.
If you are working in a skilled trade like electrical work or are a welder, you will need hot-work permits for your own protection and your employer’s.
OSHA’s facts and figures don’t lie. Construction is a dangerous industry, and USA Business Insurance can confirm that it is often not properly insured.
Food Service
There are lots of stumbling blocks that can catch up with food service businesses. Grease fires, power outages, and slips and falls can all lead to bakeries, restaurants, and food trucks shutting their doors for good.
You need to have the right protections in place to keep your door open to customers even when the going gets tough. You need business interruption insurance in case of a fire that damages your kitchen. You need to have food-spoilage protection for your company, and you need to have workers’ compensation coverage for your staff.
The CDC reports that more than 48 million people get sick each year from poor food-handling practices. You can insure your restaurant against these kinds of incidents, thereby protecting your reputation and helping out customers who might have gotten sick after visiting your business.
Always maintain a culture of safety and document food-handling and cleaning schedules. These items can help you save money on your premiums and prove that you were not negligent if something crops up. Work with your insurance carrier to bundle policies and close gaps in your coverage.
Professional Services
This is one of the toughest industries to protect, but there are good insurance products out there that can help you to keep your business safe. You need to be aware that any service where you offer an opinion, such as design-based or consulting services, carries an increased risk of legal trouble with clients.
Even accounting firms can miss deadlines for filings, and people who offer design assistance can be sued if their designs don’t actually work as planned. You need to be protected against these risks so you can remain operational even when a customer is not pleased with your work.
Contractor work can also trip up service providers. You need to carefully report and insure 10-99 work. Many of the claims associated with this industry stem from CPA claims, but this is also because many of these companies outsource their basic data collection functions. Always be cautious about hiring and documentation related to staff who are not full-time, regular employees.
If you are in a business that handles client health data, be aware that HIPAA applies to your business. You should ensure you have the right network security in place and the right insurance coverage for losses affecting private health data.
Fast-Growing Areas of the U.S. Can Lead to Increased Business Insurance Claims
New business locations can mean new business rules and regulations that company owners may not be aware of. When you expand your business operations to include new states or even new counties, you need to ensure you are properly covered to operate in those locations.
You might find that the shift to e-commerce exposes you to a much higher risk of cyberattacks. Credit card collection systems and payment gateways are targeted by hackers constantly, and you do not want to be left unprotected if your website is hacked. Breach laws, notification complexity, and other local laws can all come into play if you are not correctly insured for this kind of exposure.
If you are using the cloud or working with third-party vendors for business product access, you could be at risk for a cyberattack through these business connections. Your data is only as safe as your vendors and business partners. You need to be sure that you are protected against losses caused by other businesses that have access to your company’s data.
At the end of the day, a simple insurance check-in can resolve most of these common oversights. You are a busy company owner, but you do have time to protect your investment.
Some Tips to Improve Your Insurance Protection Picture
1. Check the Numbers
Report corrected payroll figures to your insurance company and keep an income worksheet that helps you to track changes in your staffing. You should be certain that you are not underestimating. It is better to overestimate than underestimate when it comes to income reporting. Make sure you also know the replacement costs for your inventory, business property, and other critical business items, such as machines and tools.
2. Map Outage Potential
If you are not sure, off the top of your head, how much an internet or power outage would impact you, you need to make an outage map. Check out suppliers, platforms, and limitations to your ability to stay connected if something goes wrong. You need to document dependencies and develop contingency plans to protect business uptime.
3. Reduce Dependence on Subs and Vendors
If you can reduce exposure related to subs and vendors, do so. These risks can take companies down with a single claims event. You will need to ensure that your subs have current COIs on file and that you are a named insured on those documents. If you have vendors who interact with your network, ensure their access is appropriately limited and that they do not access customer data or company information unless absolutely necessary.
4. Limit Access
Be sure that you don’t allow employees access to your entire network. You need to limit access by necessity. This is important in case you suffer a hacking event. If the hacker cannot access everything, you can limit your exposure and reduce your risk.
Be sure that no one has casual access to your network or business locations. Control who comes and goes and monitor employee behavior online. Require sign-offs for equipment usage, devices, and other important business tools.
5. Have a Cyberattack Plan
Make sure you have a cyber threat plan and that your staff is trained to follow it. Hacking events are common enough these days that you need to be sure that you can shut down your network and control the breach as quickly as possible. Make sure you test this protocol periodically and seek professional guidance if you need to improve your methods.
Common Myths That Company Owners Believe
Myth: The power was out, so I can get access to income coverage.
Answer: Actually, you cannot necessarily access business interruption coverage just for a power outage. There are specific guidelines about when your business interruption coverage kicks in, and you need to understand them correctly.
Myth: My cloud vendor has an SLA so I am not at risk.
Answer: Service providers might have SLAs, but that doesn’t mean that you can’t be exposed to risk through their actions. You can be held accountable for downtime and other problems that affect your business caused by a third party.
Myth: A COI means someone has coverage.
Answer: A COI proves that coverage exists, but it is not a guarantee. Missing endorsements or coverage that lapses while a sub works for you can open your business up to risk.
Myth: My company is too small to be hacked.
Answer: These days, no company is too small to suffer a cyber loss. Small businesses are easy to hack, and hackers know it.
Make Sure That You Sync Your Insurance Growth With Your Business Growth
You need to ensure your insurance coverage keeps pace with your business growth at all times. Make it part of your routine to report changes to payroll, new purchases of equipment, and changes in your staffing and services to your insurance agent. You need to report on a culture of safety, upgrades, and improvements in your site security as well. Ask about bundled coverages and ways to close gaps in your insurance protections.
If you are operating in a growth market, be sure your insurance keeps pace with the changes your business is experiencing. You can avoid the common insurance pitfalls that lead companies to close down each and every month.
At USA Business Insurance, we are happy to help you to secure the insurance protection that you need to allow your business to thrive. We insure plumbers, welders, handymen, hood cleaners, and owners of nearly any business type that you can think of. We take pride in offering custom coverage that perfectly protects businesses, no matter how niche their operational space may be.
Reach out to us today and find out how we can help you to get the right insurance protections for your growing business.
