What Are the Risks of Canceling Commercial Insurance?

Once you decide to cancel your insurance, there are four commercial repercussions to consider.

Will your firm be exposed to lawsuits or other costly claims? If you cancel your insurance without replacing it, you will have no protection against lawsuits or other costly losses.

By canceling a claims-made insurance policy, will there be a coverage gap? A claims-made policy can cover prior incidents, but you must maintain ongoing coverage, even if you move providers. This sort of policy is commonly found in conjunction with errors and omissions, professional liability, and directors and officers insurance, all of which require you to have active insurance in order to be covered for a previously insured occurrence. Discuss acquiring an extended reporting period (ERP) or tail coverage with your insurer if you decide to terminate your policy. This feature allows you to apply for benefits despite canceling your claims-made policy.

Will you reduce your insurance coverage to save money? It is essential to save money on insurance premiums. However, if it comes at the expense of leaving your business defenseless, it may prove to be a poor move in the long run.

Adjusting your coverage to match your needs may be preferable to terminating your policy. In certain instances, you may be able to modify your coverage to match your needs without having to terminate your insurance. For instance, if the nature of your business has changed or if you have relocated, you may be able to amend your coverage to match your new circumstances.