Why do business owners get insurance with a 1/1 effective date?

by Hiscox

Small Business Policy Start DateJanuary 1st is a popular date, marking the start of a new year and all the potential that carries with it.  For small business owners, 1/1 is also a top-pick effective date for professional and general liability insurance policies.

Naturally, you can begin your entrepreneurial venture’s liability insurance coverage at any time, but many of our customers choose January 1st as their effective date.  Noticing this trend, we asked them why. Here’s what they said:

  • Tax purposes: Since it’s the start of a new tax year the premiums and other costs associated with the policy will align nicely with the recordkeeping and tax functions of their business
  • Launch of business: Many entrepreneurs choose to launch their business on January 1st, and oftentimes contracts have 01/01 start dates.  Having their liability policy go into effect the same day just makes sense.
  • New years resolution: Some business owners know they need professional liability insurance and general liability coverage but put it off, so they make “get liability coverage” a New Year’s resolution – one they can check off as soon as January 1st rolls around and their policy goes into effect.
  • Regulatory changes: At times, small businesses have to secure liability insurance to meet regulatory changes, which often take effect on the first of January.  For example, a California city now requires personal trainers using public areas to carry liability insurance, and this rule went into effect January 1st of this year.
  • After Christmas: Towards the end of the year small businesses without insurance often resolve to get coverage starting January 1st, knowing that Christmas bills won’t leave them with enough cash-flow to start before then.
  • Billing date: Some start-ups like to have all recurring expenses share the same due date.  The 1st of the month is easy to remember and keeps things simple for accounting.
  • Superstition: And then there’s the reason of simple superstition.  The date 1/1 feels “lucky,” or less “unlucky” than others, so they go with it.


While it’s too late in 2014 to get a professional liability policy of general liability coverage with a January 1st start date, don’t let that stop you from getting the coverage your business needs to be protected from lawsuits.  There’s always the first of February!


The contents of this article and the linked materials do not offer legal, business, or insurance advice related to the needs of any specific individual business. Please consult your professional advisor. 


Kevin Kerridge is the director of small business insurance for Hiscox, a company that provides customized business insurance for small business professionals such as consultants, IT professionals, bookkeepers, real estate agents, architects, engineers, and many more.

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