To reach its conclusions, the company surveyed 1,000 small business owners in the U.S. and asked participants questions identifying both the kinds of business insurance they owned and their familiarity with the most used policies. The most common insurance type reported by participants was general liability coverage, followed by property insurance, compensation insurance and professional liability insurance. Only 65% of respondents said they owned general liability coverage, which the study notes is a “foundational coverage that nearly every business, no matter how small, should have.” Hiscox also claims that 75% of the small business owners participating in the survey were underinsured as of this July, although the company does not provide a methodology for how this number was ascertained.
While the number of underinsured small businesses may need closer examination, a more important conclusion drawn from the study is the level of insurance illiteracy among small business owners. Out of the survey’s 1,000 participants, Hiscox notes that 71% were unaware of the coverage provided by a business owners policy, while 83% lacked substantial knowledge of a general liability policy.
Regardless of the coverage they need, insurance literacy is a must-have for small business owners. Not only will a better understanding of the options help them make better choices for their organizations, but it will also reduce the number of underinsured companies, ensuring that assets and livelihoods are well protected. The Small Business Administration offers educational resources for those looking to learn more about business insurance, including a four-step approach to purchasing a policy. The administration heavily recommends that entrepreneurs start the process by identifying the risks affecting their operations and finances the most. Rather than staying with one provider, small business owners should also assess their insurance options on an annual basis to ensure that their coverage continues to suit their needs.