Is Your Business Really Protected? 5 Gaps in Commercial Insurance Most Owners Miss
When you think about protecting your business, you probably picture a basic general liability policy — the one that covers slip-and-fall accidents or minor property damage. But in today’s fast-paced and lawsuit-happy world, many businesses unknowingly leave themselves exposed to major financial risks.
Here are five critical insurance gaps business owners often overlook — and what you can do about them.
1. Cyber Liability: Thinking It Only Affects Big Companies
Reality Check: 43% of cyberattacks target small businesses, according to Verizon’s 2023 Data Breach Investigations Report.
Yet, many small business owners still assume cyber insurance is unnecessary — until it’s too late.
What It Covers:
Data breaches
Ransomware attacks
Business interruption due to cyber incidents
Legal fees and notification costs
The Risk: A single data breach can cost a small business an average of $120,000 (according to IBM’s Cost of a Data Breach Report) — often enough to close a company’s doors for good.
Pro Tip: Even if you don't store customer credit card numbers, emails and personal information still make you a target.
2. Professional Liability: Assuming General Liability Covers Everything
Reality Check: General liability policies do not cover claims of negligence, misrepresentation, or errors in services provided.
What It Covers:
Mistakes that cause financial harm to clients
Failure to deliver a promised service
Inaccurate advice (especially important for consultants, architects, and service-based businesses)
The Risk: Without professional liability (also known as errors and omissions insurance), a single lawsuit could drain your business assets, even if you did nothing wrong.
Pro Tip: If you offer advice, services, or consulting of any kind, you likely need this additional coverage.
3. Employment Practices Liability Insurance (EPLI): Ignoring Employee-Related Risks
Reality Check: Over 60% of all employment lawsuits are filed against small businesses (Small Business Administration).
What It Covers:
Discrimination claims
Sexual harassment allegations
Wrongful termination lawsuits
Retaliation claims
The Risk: Legal defense costs alone can bankrupt a small or midsize company — even if the claims are baseless. According to Hiscox, the average employment lawsuit settlement is $160,000.
Pro Tip: Coverage should be considered as soon as you hire your first employee, not when you grow larger.
4. Business Interruption Insurance: Forgetting About Disaster Downtime
Reality Check: 1 in 4 businesses won't reopen after a major disaster, according to FEMA.
What It Covers:
Lost revenue during a forced closure (fire, flood, etc.)
Ongoing expenses like rent, utilities, and payroll
Temporary relocation costs
The Risk: Even if you have property insurance, it may not cover the lost income while you rebuild or relocate after a disaster.
Pro Tip: Make sure your policy reflects realistic timelines for recovery — some rebuilds take far longer than 30 days.
5. Equipment Breakdown: Thinking It’s Included Automatically
Reality Check: Property insurance covers external damage (like a fire) but not internal mechanical failure.
What It Covers:
Electrical surges
Motor burnout
Mechanical breakdown of critical equipment (HVAC, machinery, computers)
The Risk: One equipment failure could shut down operations for days — and without this protection, you're footing the repair or replacement bill yourself.
Pro Tip: This coverage is especially critical for manufacturers, restaurants, healthcare providers, and any business relying heavily on specific equipment.
Final Thoughts:
The Bottom Line?
Many business owners think they’re covered — until they find out the hard way that insurance gaps exist. A quick policy review with a trusted agent can identify these blind spots before they turn into major financial disasters.
At EFC Insurance, we specialize in tailoring coverage to real-world risks — not just checking the basic boxes.
📞 Let’s schedule a free risk assessment and make sure your business is truly protected.
Sources:
Verizon 2023 Data Breach Investigations Report
IBM Cost of a Data Breach Report 2023
U.S. Small Business Administration (SBA)
Hiscox 2022 Small Business Employment Lawsuit Report