When launching a new business, it’s critical to invest in the proper types and level of insurance coverage to protect your budding company from liability. But like other foundational business systems, if your insurance isn’t regularly reviewed and updated as your operation grows, your coverage may prove inadequate, putting your business at serious risk.

In general, it’s a good idea to review your insurance coverage on an annual basis. But as your business evolves, you should also revisit your policies whenever your company undergoes significant changes involving infrastructure, assets, and personnel. While there are a wide array of events that could necessitate an audit of your insurance coverage, the following 5 are among the most common—and crucial.

1. Office relocation or renovation
If your company is growing, it’s often necessary to move to a new location or make additions to the current building you’re occupying. But unless you review and upgrade your commercial property insurance and general liability insurance, your existing policies may not may not be enough to cover the new space and its contents.

If you move to a new location, you’ll definitely need to adjust your property insurance coverage to account for the particulars of the new space. Your rates may fluctuate depending on your new office’s square footage, building type, the location’s crime statistics, safety features, history, and other factors.

2. Hiring new employees
As your team members come and go over the years, you’ll need to adjust your workers compensation coverage to reflect your current staffing level. Having the proper workers comp coverage is not only a good idea, it’s the law, and failing to update your coverage could lead to fines and other penalties.

Another liability consideration when adding new team members is employment practices insurance in case one of your staff sues you. The more employees you have, the greater the risk of a lawsuit and the higher the resulting damages, so you should adjust your level of coverage as your team expands.

3. Adding a new product or service
Launching a new product or service is a great way to increase revenue and grow your operation, but it also opens up the potential for new lawsuits.

If you’ve expanded your product line, you should update your product liability insurance to cover the new items in case they’re defective or otherwise harm a customer. You’ll also want to review your property insurance to cover the items in case of theft, damage, or loss while they’re stored in your warehouse.

If you make your living by providing professional services and/or advice, you should have professional liability insurance, and your policy will need to be updated to account for your new offering. Professional liability insurance covers lawsuits arising from actions such as negligence, mistakes and omissions, and violation of contract.

4. Purchasing new vehicles
If you or your team use a company-owned vehicle, each of those vehicles should be covered by comprehensive commercial auto insurance to protect against liability as well as any injury/damage to your employees, vehicles, products, and equipment.

If your team uses their own vehicles, their personal insurance may cover them. But for maximum protection, consider purchasing “non-owned auto liability coverage” in case an employee fails to renew their insurance or has inadequate coverage.

5. Changes in executive governance
If your company grows large enough or changes corporate structure to add board members and/or officers, each person serving should be covered by directors and officers insurance. Such coverage protects executives should they be sued for a decision they made on behalf of the company.
At the same time, consider taking out “key-person” insurance (also known as key-man insurance) any time you hire a new high-level executive. Key-person insurance is basically life insurance that pays out to your company should the owner, an officer, or another top executive pass away. Such coverage can be immensely valuable for small companies which would otherwise collapse in the absence of certain top-tier team members.

Enlist our help with your insurance audit
Before you sit down with an insurance agent, meet with your Family Business Lawyer™ for guidance. As your company expands, we can support you by evaluating the specific risks your company faces at each stage of growth to determine exactly what kind of insurance you need and what levels of coverage will best protect your business assets.