Keeping business safe and profitable
Accidents, fires, natural disasters–these catastrophes are never in a company’s business plan. Yet, adequate insurance coverage for these occurrences should be.
Making the right insurance decisions is crucial to the success of any business. Industry experts Rich Kalina of General Casualty Insurance Companies and Jeff Dehn of Unigard Insurance Companies advise small business owners on how their businesses can reap future financial rewards rather than face financial ruin.
“Insufficient insurance planning will leave a business out of commission,” said Dehn. “Ensuring a business is protected and able to recover quickly from a loss is imperative to the survival of any company.”
Make the right savings decisions
Businesses can save money on their insurance, but it must be done carefully or it could be harmful to the company.
One savings often overlooked is carrying higher deductibles. Many people think a lower deductible is better because costs are less when a loss occurs. But over time, the money they save with lower premiums could more than cover higher deductible costs.
Kalina recommends business owners talk with their independent insurance agents to determine what size deductible they can afford to carry. Completing a cost-benefit analysis that considers the size of the business, financial strength and allowable risk can also help.
“Insure for the catastrophic losses that could mean financial ruin for your company, instead of carrying expensive policies with low deductibles that pay for small, routine claims your business can afford,” said Kalina. “Large losses are less likely to occur but more likely to put one out of business if not insured properly.”
Some businesses may think they are saving money by buying lower insurance coverage limits. However, the cost of additional coverage becomes progressively cheaper as more is purchased. Kalina advises businesses to purchase the amount of coverage that will adequately protect their business.
Invest in the long term
A commercial insurance policy is an investment in a business. Building a solid relationship with your insurance provider can be mutually beneficial in the long run. The provider may consider the length of time a business has been a policyholder during the renewal process. Some companies provide discounts for long-term policyholders. Establishing a solid relationship can help contain premium costs and ensure the business doesn’t lose coverage.
Dehn recommends reevaluating commercial insurance coverage every three to five years. “When examining carriers and coverages, it’s important to not just compare price. Consider what you’re getting for your premium dollar, such as 24-hour claim service, loss control assistance and knowledgeable, industry-specific claim adjusters.”
Insure to value
Dehn reminds owners to insure the full value of their property. If not, they could end up losing money, paying a co-insurance penalty, or–even worse–not being able to reopen if a catastrophic loss occurs.
Simply purchasing insurance is not good enough. Buying the right coverage is extremely important. Countless businesses that suffer from large losses, such as fires or other catastrophes, will not reopen because they don’t have proper coverage.
At the same time, he recommends that business owners be careful not to buy coverage they don’t need or that may already be included in a package. Look for niche marketing packages that bundle the coverages unique to the industry type and business size, such as liability, property and business interruption coverage. Evaluate policies on whether they adequately protect the business, not price alone.
Reduce losses and costs
The number and cost of claims is a key criterion considered by many insurance carriers when determining the cost of a company’s insurance coverage. This can be compared with the factors that influence the cost of personal auto insurance. The greater the number of speeding tickets or auto accidents a driver has been in, the higher the costs of coverage will be.
To manage risk and avoid losses, Kalina recommends businesses:
- Work with suppliers and shippers to keep inventory levels low.
- Screen employees carefully to help decrease potential claims. Look for drivers with good driving records and workers without prior injuries and workers’ compensation claims.
- Take good care of vehicles and property and record maintenance procedures.
- Implement a basic safety program and disaster recovery plan.
- Document claims as they occur – this can be especially helpful when you decide to switch insurers.
Always be prepared
A business owner that is prepared and proactive will see savings. By providing accurate claims, payroll and sales records, the business owner will help insurance companies provide a fair price for coverage.
Dehn recommends business owners begin evaluating their policies 90-120 days before they expire to ensure they receive the best coverage at the best price. The more complex a business’s policy, the earlier the owner should begin reviewing coverage with an agent. Agents can help owners understand their policies and how coverages are configured, so they’ll understand the price they’re paying.
Partner up for better protection
Independent insurance agents are a valuable resource for every business owner. A strong partnership with an agent will ensure business owners receive the optimum price and coverage for their business. Independent agents work with multiple insurance companies and can provide advice on needed coverages and a knowledgeable comparison between the different companies they work with. They can help determine if businesses are carrying the proper coverages and limits and may be able to help them save money on their insurance.
For more information please contact Anne M. Smith.