Business insurances: 9 misconceptions

When your business suffers an unexpected misfortune, you expect your insurer to cover the damage. But sometimes the insurance company will not pay the costs. For example, the damage falls under professional liability, not corporate liability. Find out what common misconceptions there are about business insurance and what you can do to minimise your risks.

Misconception 1: I only need business liability insurance.

If you are an adviser, it can be a good idea, or even mandatory, to take out professional indemnity insurance as well as business liability insurance. Business liability refers to physical damage. For example, if a customer slips on the wet floor in your store and breaks their leg. Professional indemnity concerns damage as a result of incorrect advice. For example: you are an IT specialist and you give the wrong advice. Because of your mistake, the launch of a website is delayed, resulting in a loss of turnover for your customer.

Misconception 2: Insurance is always way too expensive.

This varies by industry and by profession. An insurer looks at the risk and the number of claims it can expect. Greater risk for an insurer leads to higher costs for the insured. You lower your premiums through a higher deductible. Sometimes there are options to arrange discounted insurance via a trade association (in Dutch), a professional organisation, or an interest group for self-employed professionals. You also often get a discount if you take out a combination of several insurances with 1 provider.

Misconception 3: My legal expenses insurance protects against costs in the event of legal problems.

business legal expense insurance pays the costs for legal assistance by a legal adviser or lawyer. But it does not cover the amount of the damage. Business liability insurance covers the costs of damage if you, your employees, or your products are liable for any damage. Do not let it get to that point. Draw up general terms and conditions and use a careful quotation process to limit legal problems.

Misconception 4: I am privately insured, so I do not insure my business.

Your business assets such as a laptop, tools and machines are not covered by your private household contents insurance. You need to take out business inventory insurance for that. Business liability must also be arranged separately: your private insurance against civil liability does not protect you in your business activities.

Misconception 5: I have a bv, so I am not jointly and severally liable.

In the legal forms sole proprietorship, general partnership, professional partnership and limited partnership, you are liable with your private assets. This is also known as joint and several liability. A private limited company (bv) is a legal entity. With a legal entity, you are in principle not jointly and severally liable. The risk of personal liability after a mistake can be insured with director's liability insurance.

Are you going to apply for a business loan? Then you often have to co-sign in private. Then you are personally liable to the lender. In the event of bankruptcy, the trustee will look at whether you have managed the company properly. If not, it may be a case of mismanagement. This could be the case, for example, of late filing of annual accounts. You can then also be held personally liable.

Misconception 6: With good terms and conditions I can exclude all risks.

You limit risks with good general terms and conditions, but you cannot exclude everything. You cannot provide for all situations in general terms and conditions. Insurance supplements your general terms and conditions. You can often obtain specific general terms and conditions for your sector via a branch or professional association. Do you use your own terms and conditions? Have them checked by a lawyer.

Misconception 7: I work alone at home in my attic and run no risk.

Even if you work from home, there are risks. You run the risk of a traffic accident or a sports injury when playing football or skiing. If you are temporarily or permanently unable to work for your company, disability insurance  provides income.

Misconception 8: Mandatory employee insurance covers risks for my staff.

Your employees are protected by compulsory employee insurance if they become unemployed, incapacitated for work or ill. As an employer, you can take out additional insurance for risks and costs in the event of absenteeism, an accident or the death of your employees. This means that your company and your employees have extra protection. Absenteeism insurance covers you against the costs of a sick employee. The insurance pays you the salary of your sick employee and reimburses the costs of reintegration and absenteeism guidance. Collective accident insurance is a financial compensation in the event of the death or disability of an employee as a result of an accident during work or while commuting. A survivor's insurance compensates a large part of the income of your employee in the event of death. Your employee's partner will then receive a benefit. This not only covers risk for your employees, but also offers you a valuable fringe benefit.

Misconception 9: I have built up a pension as an employee, so now I am a self-employed professional I do not need to.

That depends on how much pension you built up as an employee. The longer the period as a self-employed professional, the more important it is to check if that pension is sufficient for you. Do you have a partner with a good pension and a buffer? Then there is less need to build up a pension as a self-employed professional.