Being underinsured puts your business at serious risk of financial loss, legal exposure, and in some cases, closure. If a claim exceeds your policy limits, or a new area of your business isn’t covered, you may be paying for damages out of pocket. As risks evolve, failing to update your insurance strategy can leave you vulnerable. Here’s what you should know.

Quick Takeaways

• Insurance policies don’t automatically adjust as your business grows.
• Expanding services, adding locations, or changing your operations can create gaps in coverage.
• Industry-specific risks often require custom policies.
• Business interruption and liability insurance are critical and often underfunded.
• Regular insurance reviews can prevent costly surprises.

When it comes to business, risk is a constant. Whether it’s a natural disaster, a data breach, or a lawsuit, no business is immune to unexpected challenges. Proper insurance coverage can help mitigate this risk, but not all policies are created equal. As your business evolves, there’s a real danger that your insurance coverage might not keep pace. Whether you're a small business owner, CFO, or operations manager, knowing the signs of underinsurance is key to protecting your organization. Let’s break down what to look for—and what to do next.

5 warning signs that your business might be underinsured

1. Your business has grown- but your policy has not 

Has your company added staff or equipment? Have you increased revenue? If your insurance coverage has stayed the same amid these changes, there is a high chance that you’re underinsured. It’s wise to review your insurance at least annually to keep up with business growth.

2. Have You Changed Your Operations? 

If you’ve diversified your offerings or changed your business model (like launching e-commerce or adding a delivery fleet), you may need additional coverage. Your current policy might not reflect your full risk profile anymore.

Example: A restaurant that started food delivery during the pandemic may need commercial auto coverage.

3.  Are You Covered for Industry-Specific Risks?

A standard policy won’t cut it if you operate in a high-risk or specialized field. For example:

• Tech companies should have cyber in.
• Construction firms need contractor liability coverage.
• Healthcare providers may need malpractice insurance.

It’s helpful to work with a broker familiar with your industry to identify the right protections.

4. Do You Have Enough Business Interruption Coverage?

If a fire, flood, or disaster forced your business to close for weeks or months, business interruption insurance could make or break your survival. But many policies don’t cover enough to support long-term recovery.

Example: After a hurricane, a manufacturing plant was closed for 6 months—but their policy only covered 3 months of lost income.

5. Is Your Liability Insurance Keeping Up With Your Risk?

If your liability coverage hasn’t been updated recently—or is just the minimum required—you could be facing a huge shortfall in the event of a claim.

Quick tip: Umbrella policies offer extra coverage beyond your core policy, usually at a reasonable cost.

FAQs About Business Insurance

1. How often should I review my insurance coverage?
   At least once a year or whenever your business undergoes major changes.
2. What’s the most commonly overlooked type of business insurance?
   Business interruption and cyber liability are often underfunded or skipped entirely.
3. Can I adjust my policy mid-year?
   Yes, most policies allow mid-term adjustments to reflect operational changes.
4. Should startups worry about underinsurance?
   Absolutely. Rapid growth and pivots make early-stage companies especially vulnerable.

Insurance isn’t just protection—it’s a strategy. KLR Insurance Advisors helps businesses, executives, and high-income individuals align their coverage with financial, tax, and succession goals. Whether you're updating a buy-sell agreement, protecting key leadership, or planning for long-term care, our tailored solutions offer peace of mind and long-term value.

To best serve our clients’ needs, KLR Insurance Advisors partners with a trusted third-party service provider for the placement and management of property and casualty insurance coverage. All property and casualty policies are issued and administered through this independent provider. We remain committed to helping clients navigate their options and ensure their insurance strategies continue to align with their evolving goals.