Practices That Can Raise Your Organization’s Insurance Cost

For small business owners, non-profit directors, and organizational leaders, commercial insurance is an unavoidable necessity. While factors like marketplace competition and the nature of your organization influence base rates, your final premium is a direct reflection of controllable risk.

Simply put: Bad habits lead to higher claims, and higher claims lead to steeper premiums. Avoiding these ten common organizational failures is the most effective way to secure favorable insurance rates and protect your mission.

Category 1: Operational and Safety Failures

These failures directly increase the likelihood and severity of liability and workers’ compensation claims.

1. Failing to Maintain a Safe Workplace

Your insurer relies on your commitment to physical safety. Ignoring routine maintenance, failing to promptly repair hazards (e.g., loose floor tiles, poor lighting, icy walkways), or allowing clutter to accumulate increases the risk of slips, falls, and property damage.

• Action: Implement a routine, documented inspection schedule for all facilities and equipment.

2. Not Providing Regular Safety Training

A lack of consistent safety education is a primary driver of workers’ compensation and general liability claims. Untrained staff are more likely to misuse equipment, ignore safety protocols, or handle hazardous materials incorrectly.

• Action: Establish mandatory, documented training sessions (monthly or quarterly) on topics relevant to your operations (e.g., proper lifting techniques, fire safety, vehicle use).

3. Ignoring Specific, High-Impact Risks

Every organization has unique vulnerabilities. Ignoring a known, specific risk is an open door to a catastrophic claim. For a church, this might be inadequate background checks; for a small business, it might be poor cybersecurity controls.

• Action: Conduct an annual risk assessment to identify your top five unique vulnerabilities (e.g., cyber exposure, mold, volunteer driver liability) and implement targeted mitigation strategies.

Category 2: Administrative and Compliance Failures

These errors invalidate coverage, complicate claims, and expose the organization to legal penalties.

4. Failing to Keep Adequate Records

Poor documentation makes it nearly impossible to defend against a liability claim or prove compliance. This includes training logs, maintenance records, and incident reports.

• Action: Centralize and digitize all critical records. Ensure every incident (no matter how minor) is documented immediately and thoroughly.

5. Failing to Comply with Employment Laws

Violations of local, state, or federal employment laws (e.g., wage and hour issues, discrimination, harassment) lead to claims against your Employment Practices Liability Insurance (EPLI) or potentially uncovered litigation.

• Action: Conduct regular audits of your HR practices and mandatory staff training to ensure strict adherence to all labor laws.

6. Hiring Uninsured Contractors

When you hire a contractor without verifying their own General Liability and Workers’ Compensation coverage, you assume liability for any injuries or damages they cause while on your property.

• Action: Mandate and verify current Certificates of Insurance (COI) from every vendor, contractor, or service provider before they begin work.

Category 3: Insurance and Financial Missteps

These choices reflect poor financial planning and can leave the organization dangerously exposed.

7. Failing to Purchase Insurance

Operating without necessary coverage (like General Liability or Workers’ Compensation) is not just fiscally reckless; it is often illegal and exposes the organization’s assets to total loss from a single lawsuit.

• Action: Secure foundational coverage immediately, prioritizing mandatory legal requirements.

8. Purchasing Inadequate Coverage

Buying insurance solely based on the lowest premium often results in coverage limits that are far too low for the actual risk. A $1 million liability limit may be insufficient in today’s litigation environment.

• Action: Always purchase coverage limits that reflect your organization’s assets and exposure. Consider adding an Umbrella or Excess Liability policy for added protection.

9. Self-Insuring Without Adequate Resources

Self-insuring (electing for extremely high deductibles or skipping certain coverages) only works if the organization has substantial, liquid reserves set aside to cover potential losses. If a large claim hits, your mission funds are at risk.

• Action: Only utilize high deductibles if your liquid reserve fund can comfortably pay that deductible immediately and without disruption to operations.

10. Choosing the Wrong Insurer or Broker

Partnering with a carrier or broker who does not understand your specific sector (e.g., non-profit, construction, healthcare) means they may miss critical coverages or fail to offer specialized discounts, leading to an inefficient and costly program.

• Action: Work with an independent broker who specializes in your industry and can shop the marketplace to find carriers that reward your specific risk profile.

Your next step toward lower premiums is a comprehensive risk audit. Get a quote here.