Insurance is essential for all businesses, large and small.  Indeed, some types of insurance are required by law, such as workers’ compensation insurance for businesses who have more than two workers.  This article will address selected do’s and don’ts for small businesses purchasing property/casualty insurance.  Please note that it is not a comprehensive list and does not address health insurance issues.

DO consider the landscape of the insurance market when selecting an agent.  For example, broadly speaking, the property/casualty market has two types of insurance companies: so-called “direct writers” and independent agents.  Direct writers, such as State Farm, offer through their agents only State Farm products.  Independent agents, on the other hand, have “appointments” with multiple insurance companies and may offer insurance policies written by those companies.  The number and identity of these insurance companies vary widely from independent agent to independent agent.  Accordingly, it is prudent to discuss in detail with your agent what types of insurance products the agent may be able to offer to you.

DO explain in great detail the nature and operations of your business.  Unless your agent has complete information, your agent cannot procure an appropriate set of insurance policies.

DO update your agent on any and all changes that take place during the term of the insurance policies.

DO read your insurance policies as soon as they arrive and ask your agent any questions that you may have.

DO provide only truthful information to your agent when applying for insurance and when making a claim.  Failure to do so may void your policy and may even subject you to a charge of insurance fraud, which is a crime in Virginia.

DO NOT THROW YOUR POLICIES IN A DRAWER INSTEAD OF READING THEM! Virginia law imposes a duty on policyholders to read their policies and to contact their agents if the policies do not appear to be correct.  In a significant decision, the Supreme Court of Virginia reversed a judgment for a small business owner who alleged that his agent negligently failed to procure the increased policy limits that the business owner had requested. The agent had indeed failed to make the requested changes to the policy, but the policyholder — who left school in seventh grade because he could not read — testified that he never looked at the new policy and literally threw it in a drawer.  Despite these circumstances, the Supreme Court of Virginia stated that the policyholder should have had his wife or someone else read the policy for him.  General Ins. of Roanoke v. Page, 250 Va. 409 (1995). While this decision is harsh, it has not been overruled and thus remains the law in Virginia.

DO NOT expect your insurance agent to advise you on all aspects of your business.  Your insurance agent is not your financial consultant, your management consultant or your CPA.