For you to adequately protect yourself and the businesses you run for the coming year new year (and always), it’s essential to accurately assess the risks, and choose insurance cover accordingly. While many types of business insurance policies offer a broad spectrum of insurance protection from equipment, property and buildings, to business assets, liability and business interruption insurance, your business may require more than one – or a combination of policies – to suit you needs.
Like all insurance, the cost of a policy will be determined by the risk versus the likelihood and the potential severity of any incurred loss. The premium will be based on the nature of the business, in which industry it operates, services offered, or which products are handled.
While there are many factors that affect the costs of business insurance, there are just as many precautions and risk improvement measures that can be taken to reduce the cost. Below are some tips to try:
Imagine insurance isn’t there, and act accordingly
This is the best advice when it comes to insurance. If you actively implement risk management measures to reduce any potential impact if a loss occurs, it can only help. Things like adding an armed response alarm system, implementing better stock control measures, and servicing fire extinguishers regularly are all good steps to take. Acting like you are not insured makes for more risk awareness and encourages risk mitigation processes and measures.
Consider going out of business
Cover these risks adequately and don’t skimp, as you losing your entire business would be worst-case scenario. The cost of insuring against a business burning to the ground is generally (and surprisingly) cheaper than you think.
Also consider the true costs of time and replacement value
Expensive equipment can not only be costly to fix or replace, it can also take time for a new part to arrive and this can negatively impact your workflow, and consequently cash-flow. Ensure that enough loss of profits cover forms part of a policy. Factor in adequate indemnity and realistic time periods, which will be required to get a business back to full operational level. Also make sure that the real replacement costs of equipment in present day value are correct. You can ask insurers for recommendations as to who could value your clients’ businesses sufficiently, too.
Generally, don’t sweat the small stuff
Keep in mind that items like cellphones, for example, are very costly to insure because they have a high frequency of loss, which essentially pushes up the premium. Depending on the nature of your client’s business, some adjustments may be possible.
Implement thorough internal controls to reduce and manage potential loss
This should include you making employees accountable and aware of their responsibility to the company. Stringent stock controls, good vehicle maintenance programmes, strong cash management control, sound quality controls and so on. These control measures will all contribute to good risk management. Businesses with sound controls and good risk management attract better ratings and less punitive measure on their policies.
Have higher excesses in place
This will bring premiums down quite a bit. You may find that keeping a reserve fund to cover an excess, should a claim arise, is a better system for you. Saving money each month instead of paying a premium for lower excesses can work for many businesses. This will of course be determined by the financial position of the business and how you manage internal controls.
Make maintenance a priority
Insurers will often inspect the risk they are taking. Well-maintained assets that may be risks will not incur any additional improvement costs and are well-respected by insurers. Insurance companies seeing this sort of result, will be more reasonable on pricing.
Listen to your insurer’s advice on improvements
Insurers may also recommend some improvements. By making these improvements, risks will be reduced, and the cost of the policy will decrease.
Taking these steps can really help to manage business insurance costs. In the tough economy, the safety net of short-term insurance has never been more important to get right.