What’s Your Business Really Worth? (And Why It Matters for Your Insurance Policy)

Why Coverage Must Match Your Worth

Insurance exists to help you rebuild after a loss. If your coverage limits, valuations, or terms don’t match your true worth, here’s what happens:

• Undervaluation leaves you underinsured
  Too little business income coverage won’t pay enough to cover payroll, rent, or ongoing expenses during a shutdown.
  
  
• Outdated policies miss growth
  When you expand operations, hire more staff, or land bigger contracts but don’t update coverage, you create gaps.
  
  
• Coinsurance penalties reduce payouts
  If your coverage falls below the percentage required by your policy (often 80% or 90% of actual value), the insurer can penalize you. That means you receive less than the full amount of your loss, even if the claim is smaller than your limit.
  
  
• Intangible value goes unprotected
  Without updated coverage, you risk losing skilled staff, loyal customers, or community trust after a long closure.
  

Real-World Example: Coinsurance Penalty

Picture a construction company that generates $10 million in annual revenue. Their policy includes business income insurance, but it caps coverage at only $2 million.

Now imagine a fire or major equipment breakdown shuts down operations for six months. Payroll, equipment leases, vehicle payments, and yard rentals don’t stop just because revenue does. With revenue halted and expenses piling up, the company needs $5–6 million in business income coverage to survive.

Because the coverage limit fell short, the business faces a multimillion-dollar shortfall and pays out of pocket.

And it gets worse: if the policy carries an 80% coinsurance clause, the underreporting triggers a penalty. Even on a smaller $1 million claim, the insurer might only pay a fraction — leaving the company with just half the payout it expected.

Calculate the Right Business Income Coverage

Many owners ask: “How much business income coverage do I need?” Start here:

1. Review annual revenue – Know your gross receipts and contract totals.
   
   
2. Factor in ongoing expenses – Payroll, leases, debt obligations, utilities, and premiums don’t stop during a shutdown.
   
   
3. Estimate downtime – Calculate how much revenue you’d lose in a 6–12 month closure.
   
   
4. Adjust annually – Increase limits as your business grows.
   
   

Want a quick way to estimate your risk? Take the quiz to see how much your business is really worth. “Quiz”



Keep Your Insurance Aligned with Your Worth

• Review every year – Update coverage after growth, expansions, or new contracts.
  
  
• Calculate exposures – Base coverage on current numbers, not outdated estimates.
  
  
• Go beyond property – Add business income insurance, cyber liability, and employment practices coverage to strengthen your protection.
  
  

Run scenarios – Ask: “If a fire, data breach, or equipment breakdown hits tomorrow, would my policy respond?”