What are the risks unique to my business?
You’ve researched what coverage is required by law or contract and become familiar with the major policy types. Now, what coverage do you need?
As a business owner and an expert in your industry, you are uniquely qualified to know where you have financial exposure. However, reviewing what you think are your risks with an experienced business insurance agent is a good way to map out your true risks.
Most businesses have some form of general liability risk, this is why nearly every business buys this protection first. Understanding your owned property exposure is often very clear for the small business owner.
However, the risks are different by industry and even between similar businesses within an industry.
Here are some questions you need to ask:
- Do you offer professional consultation or advice (eg. Realtors)?: You need professional liability.
- Do you sell or manufacture consumer products? Will you need product liability?
- Do you own business vehicles or ask your employees to drive their vehicles?: You’ll need hired or non-owned coverage.
- Do you have employees?: You are required to have worker’s compensation, but should you have EPLI too?
- Do you store or handle consumer information?: You will want to consider cyber liability insurance.
By understanding the risks unique to your business or industry, you can buy business insurance to protect against them.
How much risk should I take?
Having established all the areas where your business has risk, how much do you want to hold? How much do you want to transfer to the insurance company?
If you’ve determined you need coverage, then you need to buy that coverage. However, there are ways to hold more risk or transfer less, and save money. However, if you need to save money in the budget, holding more risk can help you save money. You can consider the amount of coverage you purchase or the deductible.
If you haven’t been involved in a lawsuit, it cannot be stated strenuously enough that they are expensive. In fact, a lawsuit can be financially devastating to your business even if it’s ultimately dismissed. That’s right. It can cost thousands of dollars in attorney’s fees just to establish you have no liability. For this reason, you’ll want to make sure you have enough liability insurance, professional liability, or commercial auto liability. This may not be a place where you hold more risk – carefully consider your limits of liability.
Alternatively, your property deductible may be a way for you to get coverage for the larger losses, but retain risk on the smaller stuff. This could help reduce business insurance premiums.
Pro Tip
If you operate a high-traffic business or create products or services that run the risk of high-value damages, you want to consider a commercial umbrella insurance policy to additional liability protection. It can provide additional coverage for business liability lawsuits that exceed your current policy’s limits.
Are the costs more important than the coverage?
Business owners are, by their very nature, a budget-sensitive group. So, after learning the correct policies a business needs, the owner will typically become focused on the price for that protection. That’s normal. After all, every penny counts and should be made productive. However, it’s important to remain steadfast regarding the role that business insurance plays in protecting your business from serious financial damage. Sure, it’s a sunk cost, but an extremely important one. Don’t look for budget or “cheap” solutions.
A policy with lower premiums is different from a “cheap” policy – we concede that point. There are “cheap” options, however, and you may be tempted.
So, if you’re being offered two options from well-established, recognizable insurance carriers (eg. Travelers Insurance vs. Liberty Mutual), then you may be just fine when selecting the one with the lower premium. However, if you have been presented another with a significantly lower premium, you need to ask a lot of questions. You see, “cheap” policies are priced that way for a reason. If you’re considering these types of policies, ask this question first:
- What are the coverage differences?
- What are the exclusions and conditions that may limit coverage?
- Does the carrier have questionable business practices?
- Do they have good claims practices?
Frankly, you’re better served when you buy business insurance from a reputable insurance provider. Additionally, you should always purchase the right protections, but the best coverage your budget will allow. If you go “cheap”, you may find you are without coverage when you need it most.
What factors determine my premium?
As we discussed above, your industry will dictate the coverage you need, but it will also factor into the cost of business insurance. Additionally, things like annual revenues and number of employees also play a key role in determining your premium.
While it’s a good idea to understand the things that affect your rate. Much of this is not something you can’t, or don’t want to change. That said, one of the factors is within your control – prior claims history. The things you should focus on are the things that will help you control having claims. This can help reduce your premiums. Consider focusing on these things to either reduce premium:
- Security Systems: Fire suppression systems and security alarms may reduce your commercial property insurance premiums.
- Create a safe work environment: Safe work environments may equal fewer claims, and fewer claims keep the premiums down.
- Pre-screen employees: It’s important to have employees who demonstrate responsible behavior. However, it’s especially important if you have driving risks. Employees with poor driving records who operate your business vehicles will increase commercial auto premiums.
- Keep your HVAC, roof, and electrical systems up-to-date: Even if you’re leasing, these things can come into place in determining the premium you pay, or if you’re even acceptable to some insurers.
Lastly, don’t be bashful. If your insurance agent has a direct appointment with the insurance company, ask them if they have a discretionary discount they can apply to help bring down the premiums. It can’t hurt.
Are all insurance companies the same?
If your concern is that your insurance provider stands by their promise when you buy business insurance, then you need to consider buying from an insurance carrier with a solid reputation.
Business insurance should only be purchased from a carrier with strong financial ratings from a reputable agency like AM Best. Use the AM Best site to see if the carrier has an A – Rating or better. This is an indication of financial stability and reliability.
A rule of thumb is to select an insurance carrier you recognize, has a history of offering business insurance, or can be validated by a trusted advisor – like an insurance agent. But it’s much more than their financial rating, you should want to know what services they offer, their claims and overall business practices, and how responsive they will be.
Of course, our friendly, licensed agents are available to answer your questions and help you evaluate coverage, carriers, and risk.
Should I read my business insurance policies?
All insurance policies may have broad insuring agreements in their preamble, but then define terms, draft exclusions, and outline conditions that may limit coverage in some circumstances. In fact, policies will vary widely from carrier to carrier. To run your business properly, you have to know what is covered, what’s excluded, and your responsibilities. You can actually get this from the insurance agent before you buy business insurance.
The bottom line
There are ways to compare carriers, premiums, and options. So explore those before you buy. In fact, an independent insurance agent will often have multiple carrier appointments, so look to them for assistance as they can do much of the work for you. In fact, our expert insurance agents are always available to help. We’ll connect you with an agent who has helped business owners just like you find the right coverage at the right price. A basic rule of thumb is to be conservative. Your business will likely not go under because you elected to be properly insured. Alternatively, many have gone under because they weren’t.
Want to get started? Complete our easy online application today to begin the process of comparing quotes for small business insurance – with top-rated insurance carriers of course.
