When a small business grows, hires, adds inventory, or expands into a new market, updating the insurance policy is the owner's responsibility, not the insurers'. Most owners follow through on that, according to Tang Trang (pictured), TD Insurance's vice president of small business insurance, but there is a significant part of those who don’t.
About two-thirds call to update their coverage after a major change, Trang told Insurance Business, whether that's growing inventory, adding staff, bringing in higher revenue, adding vehicles, or changing addresses. But the remaining third typically don't, and the gap tends to stay invisible until something goes wrong.
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Trang pointed to a common pattern behind that blind spot: a business insured for a set amount of inventory, say $50,000, grows well past that figure without the policy ever being updated to match. The mismatch surfaces only once a loss actually happens, at which point the payout falls well short of what the business has grown to be worth.
"I'm more concerned about this one-third," Trang said, "because many customers only discover the gap in coverage when they file a claim."
That gap, he said, isn't a minor technicality. An insurance contract typically places the burden on the policyholder to flag changes as they happen, since the policy is meant to grow and evolve alongside the business itself. An owner who skips that step isn't necessarily doing anything wrong on purpose, Trang said, but the coverage they're carrying stops reflecting the actual size and risk of their business the moment real growth outpaces it.
That blind spot matters more given how often small businesses actually run into trouble, according to TD's broader survey data. About 9 in 10 business owners reported facing some kind of setback in the past year, whether property damage, an accident, or an unexpected lawsuit from a customer. Those events, Trang noted, tend to happen regardless of broader economic conditions, meaning a business can be having a strong year financially and still get hit with a loss that has nothing to do with the economy at all.
Despite how common those setbacks are, roughly a quarter of small business owners carry no insurance at all. For those without coverage, the financial margin for error is thin: 55% of owners said an unexpected expense over $10,000 would already represent a real strain on the business, a relatively low threshold given how easily a single incident, a flood, an accident, a lawsuit, can exceed that amount.
Owners with coverage, meanwhile, report meaningfully more confidence about their ability to grow. Insured business owners scored 15 percentage points higher on confidence in future growth compared with those without a policy in place, according to Trang. He was careful not to claim the insurance itself directly causes that confidence, but said the correlation has shown up consistently enough in the data that it's become a meaningful pattern worth paying attention to, insurance isn't just protection against loss, it appears tied to how secure an owner feels about expanding in the first place.
Underlying much of this, according to Trang, is a basic comprehension problem. About 60% of business owners say they're frustrated because they don't fully understand business insurance or their own policy wording, making it difficult to know what's actually covered, what isn't, and when a policy needs revisiting in the first place.
That's exactly where a broker or licensed insurance advisor's role becomes most valuable, Trang said, rather than leaving owners to puzzle through complex coverage questions on their own. Business owners shouldn't have to become insurance experts themselves, he said; a short conversation with an advisor can resolve in minutes what might otherwise take an owner hours of research to work through, and still get wrong.
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Trang said the most effective approach isn't walking a client through a checklist of coverage types, but asking a more direct question: what actually happens if they choose not to buy a specific kind of protection. An owner who skips business interruption coverage, for example, may not grasp the real exposure until it's framed concretely, that a fire or forced closure would still leave them on the hook for rent and utilities regardless of what caused the disruption in the first place.
Framed that way, Trang said, an owner gets a tangible, concrete stake in the decision rather than an abstract list of coverage options to sort through alone, something that matters most for small business owners who are already stretched too thin across every other part of running their business to study policy wording in their spare time.
“They don't have to figure this out by themselves,” he said.
