21 Common Insurance Gaps That Could Put Your Business at Risk 

As we talk about protecting your business with insurance, unfortunately, a standard policy itself might not be enough. What’s further unfortunate is the fact that some agents and brokers rush through the process without putting in extra effort to understand your operations. This often leaves the customer with hidden coverage gaps that only reveal themselves when it’s too late.  

As a Trusted Risk Advisor, we have a different approach. For us, it is crucial to assess clients in implementing a risk management program to mitigate, minimize, and transfer risks to provide robust protection for their business, with the right coverage in place from the very first day. 

The following are 21 of the most common coverage gaps that we see in Property & Casualty (P&C) insurance: 

1. Named Insureds Not Properly Listed 

If your policy doesn’t list the right names, coverage might not apply in the time of need.  

2. No Building Ordinance Coverage 

Rebuilding to meet current codes can be costly, and this coverage covers those extra expenses. Your advisor must review your policy and include building ordinance coverage, ensuring that you are prepared to keep up with any increasing construction costs due to new building codes.  

3. Failure to waive the coinsurance requirement in favor of an “Agreed Amount” Endorsement 

Claim payout can be reduced by coinsurance penalties, and this endorsement prevents that. As a Trusted Risk Advisor, we recommend the Agreed Amount Endorsement to avoid coinsurance penalties. This is to ensure you receive the full amount for your claim. 

4. Hidden Protective Safeguards Clause 

As a business owner, you must be aware of the Protective Safeguards clause; many business owners aren’t aware of it. According to this clause, if specific protections (like sprinklers) aren’t working, some policies void coverage.  

5. Incomplete Business Income Insurance 

Be mindful that regular coverage often excludes key items like payroll or extended recovery periods, especially events after a pandemic. For coverage, you would require secure, comprehensive business income coverage, which includes payroll and extended recovery periods.  

6. Failure to Complete Business Income Worksheet 

This is what leads to a business being underinsured when disasters strike. Your Business Income Worksheet needs to be completed to calculate accurate coverage limits that mirror your business needs. 

7. Failure to Include Contingent Business Income Coverage 

If your supplier fails to deliver, you may still face significant losses. Contingent Business Income Coverage protects your business from being negatively impacted by supplier failures. Failure to include could result in major losses. 

8. Unclear Responsibility for Improvements & Betterments 

For coverage in leased spaces, you must have clarity on who covers upgrades made to rented spaces, and at what value.  

9. Overlooking Utility Interruption Risks 

Many policies don’t automatically cover such risks, especially overhead power lines.  

10. Ignoring “Functional Replacement Cost” 

It’s mostly smarter (and much cheaper) to insure based on a more efficient rebuild. We highly recommend functional replacement cost valuation to save on premiums while ensuring adequate coverage. 

11. Inadequate Crime Coverage 

In today’s digital age, we are surrounded by cyber risks like wire transfer fraud and cyber theft. Inadequate crime coverage can and does lead to hefty financial losses. Be sure to have sufficient crime coverage. 

12. Lack of Employment Practices or Fiduciary Liability 

This is the coverage that protects you from lawsuits from employees, or retirement fund mismanagement, making it a very important part of your policy.  

13. No Cyber Liability Exposure Review 

Cyber Liability exposure reviews are conducted by the advisors to ensure that your business is protected against digital risks, including data breaches and cyberattacks. If this review is not conducted, you could be underinsured according to the risks you are exposed to.  

14. Missing Additional Insured as Required by Contracts 

This is vital, especially when working with vendors or clients who expect coverage. If additional insureds are not mentioned in the policy, they may not get coverage.  

15. No Review of Notice Requirements 

Claims are mostly denied simply because they weren’t reported “quickly enough.” Your trusted risk advisor needs to ensure that your policy’s notice requirements are understood, so that claims are not denied due to delayed reporting.  

16. Overlooking Product Recall or IP Concerns in Liability Policies 

Product recall or IP concerns are not always covered by Standard Commercial General Liability (CGL) forms.  

17. “Designated Premise” Limits Coverage 

If you are operating offside, your policy may not cover you. Your advisor must ensure that your policy provides coverage beyond designated premises to protect your off-site operations.  

18. Missing “Drive Other Car” Coverage 

If you are an executive using company vehicles and do not own a personal auto policy, this one is critical. We recommend reviewing your auto coverage in detail and adding “Drive Other Car” coverage if necessary.  

19. No Physical Damage for Hired Vehicles 

If your policy covers liability, it doesn’t automatically cover actual car damage. You would need to include physical damage coverage for hired vehicles to avoid gaps in coverage.  

20. Mixing Personal and Business Auto Coverage 

This is one of the many mistakes that could leave you exposed on both ends. To ensure proper insurance protection, it is crucial to differentiate between personal and business vehicle coverage.  

21. No Stop Gap Coverage on Workers’ Compensation 

This is especially needed in certain states to cover employer liability gaps. As a Trusted Risk Advisor, we can help you add stop-gap coverage to your workers’ compensation policy to ensure that you are fully covered against employer liability in specific states. 

What You Can Do to Protect Yourself Better 

If you feel unsure about your current coverage, it’s still not too late to fix that. Give us a quick call, and we can help you spot any gaps in your coverage and build a custom risk management plan that works best for you. As a Trusted Risk Advisor, we take our time to understand your unique needs and provide proactive solutions to ensure full protection.  

Don’t wait for the unexpected; get better protection today.  

Shayne Bevilacqua, MBA, TRA, is the Principal and Owner of Professional Liability Insurance Group (PLIG) and Bevilacqua Insurance Group (BIG). With decades of experience identifying and closing insurance coverage gaps, Shayne takes a proactive role in helping business owners build smarter, more complete protection plans. His in-depth knowledge of Property & Casualty risks and strong carrier relationships make him a trusted partner for businesses that can’t afford surprises.

Get in touch for more information at (877) PLIG – 123.