The temperature inside our homes and offices can make or break our day, off by just 10 degrees, and our peaceful retreat, for example, becomes one of distress. As the protectors of comfort, productivity, and even safety, HVACR professionals are the unsung heroes of winter and summer. With a projected annual market increase of 7.4% annually through 2030, this burgeoning sector offers opportunities for heating, air conditioning, and refrigeration experts to expand or start their businesses.

For many, the prospect of entrepreneurship, which offers the autonomy to choose projects and the satisfaction of being one's own boss, can be exciting. However, HVACR business owners – whether just starting out or 10 years in – often underestimate the risks of running their own business.

Business owners often overlook insurance. A survey by Hiscox USA, a leading small business insurer, finds that 75% of small businesses in the U.S. are underinsured, leaving them financially and legally vulnerable if an issue should arise.

Why do 75% of small business owners have insufficient insurance coverage?

The answer most commonly lies in confusion about the types of insurance coverage and misconceptions about the necessity of insurance. Additionally, business owners often aren’t aware of the true extent of financial risk that owning a business exposes them to. Understanding these factors is crucial for addressing the widespread issue of underinsurance among small businesses.  

1. Lack of Knowledge

The Underinsurance Survey revealed that a staggering number of small business owners lack basic knowledge of insurance policies. Seventy-one percent do not know what a Business Owners Policy  covers, while 83% cannot accurately describe a General Liability (G.L.) Insurance policy coverage, is important for companies in the HVACR industry.

Before purchasing or renewing insurance, research the specific needs of your industry, consult an insurance expert, or use online tools to educate yourself on necessary coverage.

2. “One and Done” Mentality

Business owners often treat insurance as a "one and done" checklist item. In reality, insurance should grow along with the business; coverage for a business in its first year may look very different for the same business in its fifth year. Reviewing policies every two years is critical to ensure they match the company's evolution.

3. Coverage Misconceptions

Insurance is often the last thing on their priority list for business owners who don’t have enough time in the day for all the activities that their role demands. Some may be too busy to learn why insurance is important or may be trying to save money by opting out of a policy. Others may incorrectly believe that if they have Workers’ Compensation or G.L. Insurance, it covers anything and everything. While these policies protect against claims of bodily injury and the G.L. policy even extends to claims alleging damage to someone else’s property, they do not cover the business from claims of faulty workmanship, providing incorrect advice, missed deadlines, or personal injury from libel and slander. Without the proper coverage, these professional mishaps or wrongdoings can lead to financial disaster.

Professional Liability (P.L.) Insurance, also known as errors and omissions, offers coverage for companies facing allegations of negligence in the performance of professional services. For example, a P.L. policy would offer protection for an HVACR contractor who recommends a system that later isn’t fit for the purpose for the building, resulting in significant and costly delays to a project.

How can I determine if my business is underinsured?

Learning about different types of insurance can be daunting, but the cost associated with underinsurance can be even more daunting. Just as it’s critical to understand a business’s changing needs when evaluating the overall financial picture, it’s the same with insurance protection. You can take small steps to help match insurance to your business.

 1. Examine your blind spots.

As a business grows and evolves, changes to the company can lead to different insurance needs. Ask yourself the following questions to properly evaluate changing business needs:

• Has the company grown in the past year? Have I increased revenue, hired more employees, contractors, or subcontractors, or added new products or services?

The size of a business has implications for insurance coverage. As you welcome more employees or celebrate revenue growth, a company’s risk profile increases.

• Since the last review, have I purchased new property or offices, rented new space, or acquired tools critical to the business?

If you have acquired new offices, equipment, or essential tools like computers, this often necessitates updated coverage to safeguard these assets. Business owners can protect property and equipment  through a Business Owners Policy, which also encompasses General Liability insurance coverage.

• Does the company employ freelancers or contract workers?  

Businesses can be held liable for issues caused by these workers, such as incorrect advice or property damage.

2. Honesty is the best policy

The age-old saying still reigns true. Being honest with your insurance agent about the good, the bad, and the ugly is the best way to gain the right-size coverage for your unique business.

3. Meet with an expert

When it comes to shopping, we all have our own personal preferences on how we buy something. Whether you prefer to purchase in person, over the phone, or on a website, there are multiple ways to chat with an insurance professional who can assess your business and offer advice on what coverage is needed.

The responsibility of ensuring homes, businesses, and public spaces have adequate heating and cooling systems and keeping excess water and dangerous gases out of living areas comes with a significant amount of liability. Ensuring your HVACR business is adequately insured is not just about compliance—it's about safeguarding your livelihood and your trust. By staying informed, regularly reviewing your policies, and understanding the full spectrum of coverage your business needs, you can mitigate risks and focus on what you do best: providing exceptional service to customers.

Tyler Peterson is the Head of Professional Risks at Hiscox USA, a leading insurer for more than 600,000 U.S. small businesses, independent contractors and others, and oversees the Hiscox Professional Liability offerings. With over a decade of experience, she has developed insurance products for customers around the world and currently serves customers across the Professional Services, Healthcare, Technology, Media, and Construction sectors. Connect with Hiscox at their website or LinkedIn.