The $400 Question Nobody's Asking About Their Insurance Policy

Here is a fact that should trouble you: the average commercial insurance policy runs between 50 and 200 pages. The average business owner spends less than fifteen minutes reviewing it before signing.

I spent twenty years in underwriting before making a career pivot that my former colleagues still find baffling. In those two decades, I watched thousands of claims get denied. Not because the insurance company was being predatory—though some certainly were—but because the policyholder had no earthly idea what they'd actually purchased.

This is not an intelligence problem. I've met brilliant entrepreneurs, seasoned CFOs, and Harvard MBAs who couldn't tell you the difference between an occurrence policy and a claims-made policy. They'd signed both. They'd paid premiums on both. They'd never once considered how that distinction might matter until it did.

The Economics of Ignorance

Professional policy reviews cost approximately $400 per policy. For a mid-sized business with five or six policies, that's $2,000-2,500—roughly what you'd spend on a high-end office chair. Yet most businesses skip this expense entirely.

The math here is instructive. The average commercial general liability claim costs $82,000. The average property damage claim runs $69,000. The average employment practices liability claim—the kind that ruins companies—costs $125,000. Against these figures, $400 seems less like an expense and more like an embarrassingly small insurance policy for your insurance policy.

But here's what makes this genuinely interesting: the $400 price point isn't based on the actual difficulty of the work. It's based on the time required for a human being to read dense legal language, cross-reference form numbers, and compare coverage terms across carriers. A thorough review takes three to six hours of focused professional attention.

What Actually Lives in Your Policy

I want to share something I learned in my third year of underwriting, because it changed how I thought about this entire industry.

Every commercial policy contains what we call "coverage grants" and "coverage restrictions." The grants are written in broad, reassuring language—the kind that makes you feel protected. The restrictions are written in narrow, technical language—the kind that makes lawyers rich.

The grants say things like "we will pay for direct physical loss or damage to covered property." Sounds comprehensive, right? Then you flip to page 47 and find that "covered property" excludes outdoor signs, fences, swimming pools, retaining walls, bridges, roadways, walks, patios, and "other paved surfaces." Your parking lot just became your problem.

This isn't deception. It's just how insurance works. The carrier offers broad coverage, then narrows it through exclusions to something they can actually price. Your job—the job most business owners skip entirely—is understanding exactly where those boundaries lie.

The Three Questions That Actually Matter

After reviewing several thousand policies, I've concluded that most businesses really need answers to three questions:

First: What am I actually covered for? Not what does the declarations page suggest, but what does the policy language actually promise when you read it carefully?

Second: What are the explicit exclusions, and do any of them apply to my actual business operations? A restaurant with delivery drivers has very different exclusion concerns than a software consultancy.

Third: What endorsements modify the base policy, and do those modifications help or hurt me? An endorsement that adds "Additional Insured" status for your landlord might also narrow your coverage in ways you didn't anticipate.

These questions sound simple. Answering them accurately requires reading comprehension, insurance expertise, and several hours you probably don't have.

The Real Cost of Not Knowing

I'll end with a story that still bothers me.

A manufacturing client—good people, profitable business, about forty employees—filed a claim after a fire destroyed about $200,000 worth of inventory. Standard covered peril. Should have been straightforward.

The claim was denied. The inventory had been stored in a temporary structure that the policy excluded. The exclusion was buried on page 83, added via an endorsement that the business owner had never read and the broker had never explained.

The business survived, barely. They'd been paying $45,000 annually for coverage that vanished when they needed it most.

I'm not suggesting every policy contains a hidden trapdoor. Most don't. But some do, and the only way to know which category yours falls into is to actually read the thing—or pay someone who will.

Four hundred dollars. Fifteen minutes of your attention to hire the right reviewer. That's the gap between knowing and hoping.