Building Your Business Business Insurance Avoid These 10 Mistakes When Filing Insurance Claims Common Mistakes Could Violate Your Policy's Conditions By Marianne Bonner Marianne Bonner Facebook Twitter Marianne Bonner, a certified CPCU and ARM, has covered small business insurance topics for The Balance since 2013. She worked in the insurance industry for 30 years as an analyst and underwriter among other roles and holds multiple professional designations. Along with The Balance, Marianne has written many articles for International Risk Management Institute's Risk Report. learn about our editorial policies Updated on June 1, 2020 BartCo / Getty Images. Like many small business owners, you may make errors when filing insurance claims. Such mistakes are easy to make but can have serious consequences. Here are ten common mistakes made by business owners and the reasons you should avoid them. 01 of 10 Failing to Read Your Policy OJO Images/David Lees / Getty Images. To adequately protect your business from losses you need to understand what your insurance policy does and doesn't cover. You won't know what risks are covered if you don't read the policy. Be sure to read the entire contract, including all endorsements. If you have trouble understanding the wording, ask your agent or broker for assistance. Review your policy again before you file a claim. Be sure you understand the duties you are obligated to fulfill to obtain payment for a loss. 02 of 10 Failure to Notify Your Insurer Immediately Bruce Laurance / Getty Images. When an accident or loss occurs that's potentially covered by your policy, contact your insurer right away. Claims are easier to adjust when events have just occurred and the evidence is fresh. Moreover, a delayed response on your part may make your insurer doubt the severity of the injury or damage. Timely notice of a loss is a condition of many business insurance policies. The standard commercial property form requires you to notify the insurer promptly of any loss or damage. Likewise, the ISO general liability form requires you to notify the insurer as soon as practicable in the event of an occurrence, offense, claim, or suit. If you fail to report a loss or claim within a reasonable amount of time, your insurer may deny coverage on the basis that you've breached the insurance contract. 03 of 10 Poor Documentation Don Klumpp / Getty Images. Good recordkeeping is essential if a loss occurs because insurers require detailed information to settle a claim. Some of the information your insurer will require is stated in the policy conditions. For example, the ISO commercial property form requires you to provide complete inventories of the damaged and undamaged property, including quantities, costs, values, and the amount of loss claimed. It also requires you to submit a proof of loss. You can substantiate your written records with photos or videos. Document every communication you have with your insurer regarding your claim. Keep a list of the names and phone numbers of everyone you speak to as well as the date and time of the call. If you mail paper documents to your insurer, retain copies for your file. 04 of 10 Failure to Cooperate With Your Insurer Jose Luis Pelaez Inc. / Getty Images. Cooperating with the insurer is a condition of coverage in many business insurance policies. For instance, the ISO commercial property form states that you must cooperate with the insurer in the investigation or settlement of the claim. Likewise, the ISO liability form requires you to cooperate with the insurer in the investigation or settlement of a claim or defense against a suit. If you fail to provide information your insurer needs to process your claim, your actions may give the insurer grounds to deny coverage. Even if your insurer doesn't deny the claim, your failure to cooperate may delay your claim payment. 05 of 10 Failure to Retain Damaged Property Jim Reed / Getty Images. If property at your premises or worksite has been damaged by a fire or other peril, you might be tempted to throw it away. Don't do it! Leave the property as it is until an adjuster has inspected it. This is important as a typical property policy requires you to set the damaged property aside for examination. You must also protect covered property from further damage. If you discard the damaged property you may destroy valuable evidence related to your loss. The standard business auto policy contains similar requirements regarding protection and inspection of damaged property. If a vehicle you have insured under comprehensive or collision coverage is damaged, you must take reasonable steps to protect the covered auto from further damage. Before the vehicle is repaired, you must allow the insurer to inspect the auto and any records you have that substantiate the loss (such as photos of the accident). 06 of 10 Not Calling the Police Peter Dazeley / Getty Images. The standard commercial property policy obligates you to contact the police if a law has been broken. For example, suppose your security camera captures a video of your neighbor breaking into your office and stealing computers. Burglary is a crime so you must phone the police before filing a theft claim. The standard Business Auto Policy states that you must call the police if a covered auto or any of its equipment has been stolen. Depending on your state, you may be obligated by law to notify the police if an accident has occurred. A police report can benefit you and your insurer. It serves as proof that the accident or loss occurred and can help verify the facts related to your claim. 07 of 10 Paying Third-Party Claims Out of Pocket Dennis O'Clair / Getty Images. Suppose a customer slips and falls on your business premises and sustains a minor injury. Should you compensate that person for his injury as an out-of-pocket expense rather than file an insurance claim? The answer is no. For one thing, injuries that seem minor at the time of the accident may become serious. Likewise, some injuries may not be evident right away. A person whose vehicle you damaged in an auto collision may develop whiplash several hours or days after the accident. Secondly, the ISO general liability form prohibits any insured from voluntarily making a payment or incurring any expense, other than for first aid, without its consent. The ISO business auto policy also bars voluntary payments to third parties. If you voluntarily make a payment to someone and then attempt to recover your payment by filing a claim, your insurer may deny coverage on the grounds that you violated a policy condition. 08 of 10 Not Questioning Your Insurer's Calculations danijelala / Getty Images. If property insured under a commercial property policy is damaged, the insurer will determine the amount of loss based on the item's actual cash value or its replacement cost, whichever applies. Vehicles insured for physical damage under a commercial auto policy are valued based on their actual cash value. No matter how your damaged property is valued, you should obtain realistic estimates of the cost to repair or replace it. Don't assume that your insurer's estimate of these costs is accurate. Repair and replacement costs vary widely from place to place. Construction costs in one area may be significantly higher than those in another. If you disagree with an adjuster's valuation of a loss, let the insurer know. It may refer you to a consumer complaint department. You can also seek assistance from your insurance agent, your state insurance department, or an attorney. 09 of 10 Failing to Follow Up With the Adjuster Westend61 / getty Images. Once you've filed a claim, you can sit back, relax, and wait for payment from your insurer, right? The answer is no! Don't lose track of your claim. If several weeks go by and you haven't heard from the adjuster, follow up with an email or phone call. Ask for a progress report. 10 of 10 Admitting Your Were at Fault fstop123 / Getty Images. When an accident occurs in which someone else is injured or their property is damaged, don't admit liability. The cause of the accident may be different from what you think. Moreover, liability policies prohibit policyholders from assuming any obligation without the insurer's consent. An admission of fault could harm your defense. It might also constitute a breach of the insurance contract, which could give the insurer grounds to deny coverage. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Property Insurance Coverage Law. "Cooperation Clause Does Not Require the Policyholder’s Slavish Obedience." Accessed April 8, 2020. Lamber Goodnow. "Should I Call The Police After A Car Accident?" Accessed April 8, 2020. Mayo Clinic. "Whiplash." Accessed April 9, 2020. Insureon. "6 Mistakes Small Business Owners Make When Filing Insurance Claims." Accessed April 9, 2020.