5 Signs You’re Buying a Certificate, Not Real Insurance
Insurance is an investment. When managed strategically, it protects your company’s balance sheet, customers, and reputation. But, when insurance is considered another line item and paying premiums is seen as just a cost of doing business, it can lead to wasted resources and become a hidden liability.
We often describe companies as falling into one of two categories when it comes to insurance: certificate buyers or insurance buyers. The difference is significant.
Certificate buyers focus on meeting minimum requirements. They get insurance mainly to produce a document for a landlord, bank, investor, or client—nothing more.
Insurance buyers, on the other hand, take a proactive approach. They identify their real risks, consider worst-case scenarios, promote a culture of safety, and build an insurance strategy that supports long-term stability and growth.
Some companies start as certificate buyers, and that’s understandable. New companies are focused on keeping the wheels turning, and insurance is a means to an end. But as a company grows, so does its responsibility to protect what it’s building. At some point, there has to be a shift to becoming an insurance buyer—hopefully before a big loss forces the conversation.
I prefer working with companies that make that shift—insurance buyers who care about protecting their operations, people, and future. They’re not chasing the cheapest option; they’re building resilience. If that sounds like you, here are five often-overlooked coverage details worth paying attention to.
1. Importing from Overseas? You’re a Manufacturer Now
If you import goods directly, U.S. liability law may treat you as the manufacturer, not the distributor. Suppose an imported product has design flaws, manufacturing defects, or labeling issues. In that case, the importer can be held liable for these problems, even if they were not directly involved in the product's creation. That matters. It means you could be held liable for design, production, or labeling issues, even if those weren’t your responsibility.
Importers must ensure their insurance policies accurately reflect their role in the supply chain. Policies should be tailored to cover potential liabilities arising from product defects, design issues, or labeling errors. Misclassification can result in inadequate coverage, leaving importers vulnerable to significant financial risks.
2. Your Broker Should Be Reading Your Contracts
Subcontract agreements, cargo contracts, import terms, and other documentation create a clear roadmap that outlines who is responsible for insurance coverage at each stage of your supply chain. Are you confident that all your agreements are 1) protecting you from excessive liability exposure, 2) requiring adequate coverage limits from your partners, and 3) clearly defining the responsibilities of each participant? If your broker hasn’t reviewed these documents, they are overlooking a crucial aspect of your insurance strategy. This oversight could leave you self-insuring against significant risks or lead to expensive litigation if something goes wrong.
3. Your Insurance Should Be More Than a Reimbursement Check
Cyber insurance is a great example. A good cyber policy provides numerous services in the event of a loss. For example, breach consulting offers immediate access to experts who assess and guide responses. Forensic specialists diagnose breaches and identify vulnerabilities, enabling businesses to strengthen their defenses. Regulatory guidance ensures compliance with complex data protection laws, reducing legal risks. Public relations crisis management is crucial for controlling reputational damage, allowing organizations to manage communications and rebuild trust swiftly. These services are often made available before the first dollar of the policy limit is even touched.
This illustrates the true value of insurance: comprehensive support that equips organizations to handle crises effectively and enhances their overall risk management strategies. By prioritizing insurance options that provide these proactive elements, businesses can ensure they are prepared not just financially but also operationally.
4. Underreporting Revenue Can Backfire — Hard
Many policies are priced based on annual revenue. Underreporting revenue or not updating revenue numbers at your annual renewal might save on premiums temporarily, but carriers have audit rights. If they discover your business brought in far more than reported, they can bill you a large, unexpected adjustment — or deny claims for misrepresentation. It’s not a matter of if; it’s a matter of when. Accurate reporting protects your coverage and your cash flow.
5. “What Business Are You In?” Might Be Harder Than It Sounds
In growing companies, your actual operations can change over time, potentially outpacing what your insurance policies cover. This is particularly important when it comes to Errors & Omissions (E&O) coverage. These policies are often drafted in a manuscript form, and if your "Description of Operations" doesn't accurately reflect your current activities, a claim could be denied. If you have added services, expanded into new markets, or adjusted your business model, it is essential to ensure that your policies are updated to reflect these changes.
Bottom Line
Smart companies don’t merely “have insurance”; they invest in it thoughtfully and strategically as part of a comprehensive risk management plan. By spending just 1-2% of annual revenue on insurance, a company can effectively protect 100% of its business and secure the future of its employees. Not sure where your current setup stands? Let’s talk.
