Business Insurance Lapse

What Happens If I Let My Business Insurance Lapse?

There are a number of risks associated with allowing your commercial insurance to lapse. Often times accidents may happen during the lapse in commercial insurance and business owners can have leverage working against them. Insurance companies are not obligated to offer back-dated insurance potentially leaving businesses exposed. If the insurance company does decide to honor the back-dated insurance, they may require a no loss letter, which guarantees that no one was injured, by the customer.

In addition to risk, there are direct financial incentives that creates problems for business owners who allow their insurance to lapse. After insurance is discontinued, the same provider will often times not agree to renew the business, until the customer has demonstrated three years of continuous insurance. In addition to this, higher- risk equates to higher premium costs, similar to the case of car insurance. Those who are considered high risk drivers experience higher costs, as they are more likely to file a claim. Similarly, those who are considered high risk on coverage lapsing are more expensive to insurance companies and therefore must pay more.

Lapses in insurance affect more than, just the employer’s wallet, it often affects their time. If a carrier does not agree to reinstate the policy due to a lapse or too many lapses, it is not as simple as seeking out another carrier. Other underwriters will ask about prior polices and if there was any history of lapsing or cancellation. Also, if a business is operating out of a leased building and the lease agreement mandates an insurance policy, the business may lose its ability to conduct its operations.

In addition to risk to the business itself, there are plenty of risks to the business owner. Sole proprietors, partners, treasurers, and other responsible parties can be held personally responsible for a business’s failure to obtain workers comp.

Let us help you make informed decision about your business insurance needs.  Our licensed agents specialize in helping small businesses obtain the best coverage at the best price, give us a call today at 888-834-8619.

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