3 Insurance Gambles That Put Your Business at Risk Many business owners don't even think about insuring their business. Here are tips that can protect your company.

By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.

3 Mistakes Entrepreneurs Make When Insuring Their Business

Much like sunscreen, business insurance is one of those things you don't realize how important it is until you've been burned: A lot of entrepreneurs don't have it, and those who do, may not be fully covered.

While large corporations have staffers specifically trained to be sure the business is protected adequately, small business owners are often not aware of the risks their business faces.

"Smaller businesses tend not to get the right amount of coverage," says Loretta Worters, vice president of the Insurance Information Institute, an industry trade group that aims to educate the public about insurance. "They will get too little or not the right coverage."

Here, three of the most common mistakes to avoid when deciding on business insurance.

1. You view insurance as one-size-fits-all. Think again. There are four basic types of insurance that all businesses need, according to Worters. Property insurance protects the building that your business is housed in and the inventory, raw materials and computers that you own. Liability insurance protects you against lawsuits. Business vehicle insurance covers any autos owned by the business. Finally, in every state except Texas, a business with employees must have workers compensation insurance should an employee be injured on the job.

Related: Do You Need a Full-Timer, Contractor or Outsourced Help?

In addition, every industry has its own specific risks and your business may require a specialized policy. "You need to get an agent that understands your line of business," says Worters, noting that you should talk to an agent before just signing up with one. Ask a local business group or association for a recommendation.

2. You think you're covered by another policy. "The biggest mistake [business owners] make is they assume they don't need coverage," says Ted Devine, CEO of Dallas-based Insureon, an online small-business insurance agency. He says business owners often falsely believe their company is covered by their client's policy or they're no longer at risk when a client leaves. Not true, according to Devine. A client can come back and sue you years after an event or transaction occurs, he warns.

And don't think your homeowner's policy will bail you out, either. Even if you have a home-based business, a homeowner's policy won't protect it should you get into any legal issues with employees or business litigation. Whether the homeowners' policy will protect your business property in your home depends on the policy, says Devine.

Related: Does Your Home Business Need Insurance?

3. You think you're invincible. Worters says many businesses don't even consider what is called either business income or business interruption insurance. If a natural disaster hits, for example, and your business closes, your revenue can be immediately shut off for an undetermined amount of time, and that can really threaten the life of your business.

Related: Top Seven Mistakes Business Owners Make Filing Insurance Claims

Readers, do you think business insurance is important for your company? Why or why not?

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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