Starting a new business is exciting, but many owners overlook essential insurance protection. ERGO NEXT surveyed 501 small‑business owners and identified seven frequent mistakes that can leave a company vulnerable during its first year.
1. Assuming Insurance Isn’t Legally Required
About 57% of respondents said they didn’t purchase coverage because state and county regulations don’t mandate it. While registration, permits, and an EIN are required, most lenders, landlords, and clients will still ask for a certificate of insurance (COI) before signing contracts.
2. Prioritizing Other Costs Over Coverage
84% of owners admitted they put insurance last on the budget list, even though cash flow is tightest in the early months. Deferring coverage can expose a business to uninsured claims that quickly become financially crippling.
3. Believing Small Size Means Small Risk
“I’m small, so my risk is small,” is a common misconception. A solo‑operator can still face expensive liability claims, especially if a client or customer is injured on the premises or if property damage occurs.
4. Ignoring Industry‑Specific Needs
Different businesses require different policies. A marketing consultant may need general liability and professional liability coverage, while a construction firm with equipment and employees should consider commercial auto, workers’ compensation, and tools‑and‑equipment coverage.
5. Relying Solely on AI for Policy Selection
While 36% of owners use AI tools like Gemini, ChatGPT, or Claude to research insurance options, AI can miss critical endorsements or suggest policies that don’t exist. Always verify recommendations with a licensed broker or a relevant trade association.
6. Overlooking Cyber Liability
Nearly half of all cyber attacks in 2026 targeted small businesses, with average breach costs of $254,000. Even a boutique shop can become a victim. Implement strong passwords, multi‑factor authentication, and employee training, and consider cyber liability insurance to cover breach‑related expenses.
7. Forgetting Professional Errors and Omissions Coverage
Many owners assume a general liability policy covers professional mistakes, but most policies contain explicit exclusions. Errors and omissions (E&O) insurance protects service‑based professionals—such as real‑estate agents, consultants, and insurance agents—if a client alleges financial loss due to advice or work performed.
Take Action
Review your coverage at least annually and whenever you reach a business milestone. Speak with an experienced insurance broker, join an industry association, and ensure your policies grow with your company. Proper insurance not only meets contractual requirements but also safeguards your family’s livelihood and the future of your enterprise.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
