When an Attractively Low Business Insurance Quote Is Not Enough

The Story of How One Hobby Store Discovered its Coverage Might not Protect

Peace of mind sure is great – if it is based on reality. Owners of retail shop that sold crafts and hobby supplies on an online forum were nudged out of their complacency when they learned the insurance policy that brought them such a feeling of security might not be able to deliver coverage in the event of an insurance claim.

Here’s the chain of events that led to true peace of mind.

The hobby store business owners decided it was time to search for a re-quote on an existing $5,000 commercial policy that they thought gave them comprehensive coverage. After reaching out to an experienced independent insurance agency that dealt with all forms of auto, home, commercial insurance as well as workers comp and more, the surprising reaction was: “You may not be covered in the event you file a claim!”

How and why? The crafts store desperately wanted to know.

What the indemnity professionals revealed was that the shop was currently rated as a standard hobby supply retail outlet. But according to insurance company codes, this was an error. Because the owners imported supplies from a foreign country, they were far from standard. In fact, as per insurance codes, they were in an entirely different class: retailers that import from overseas are classified as ‘manufacturers’!

To prove the point, one member of the agency’s team actually went into the hobby store’s current insurance account to ask for a new quote. Unlike the previous time the hobby store applied for coverage, the agent answered affirmatively to the question about importing from overseas. What came up next was what this agency had predicted. Coverage denied!

Of course, the denial meant that should the hobby store submit a claim, the insurance company would research the status and learn that they had obtained coverage under wrong classification, very likely rendering the coverage inapplicable.

Faced with such a prospect, the hobby company pressed this knowledgeable agency to find them better coverage. When they were advised that this would surely lead to a higher quote, the hobby store persisted with the request. At this point, they realized that a lower quote for uncertain coverage would do nothing for them.

The agency’s efforts in finding suitable coverage were rewarded. After classifying the shop properly and sifting through companies, they found a comprehensive custom-made policy, albeit at an elevated price.

Compared to the $5,000 policy the crafts shop had which offered dubious coverage, this $9,000 quote for a plan that would cover them when they needed it most was in fact a true bargain.