Use these tips to assess what types of business insurance you need for your business and how to get the best combination of protection and price.
- Assess Your Risks and Costs. Insurance companies determine the level of risk they’ll accept when issuing policies. Through a process is called underwriting, the insurance company reviews your application and determines whether it will provide all or a portion of the coverage you request. Underwriters also determine what premium you will pay.
Premiums vary widely among insurance companies, and depend on a number of risk factors, including your business location, building type, local fire protection services, the deductible amount you select and the amount of insurance you purchase. A deductible is the amount of money you agree to pay when making a claim. Generally, the higher the deductible, the lower your premium. However, when you agree to take on a high deductible, you are taking some financial risk. It’s important to assess your risk tolerance and cash flow before buying coverage.
- Shop Around. The extent and costs of coverage vary from company to company. Further, some carriers specialize in certain types of risk exposures, offering coverages you might not find elsewhere. An independent broker represents many insurance carriers and can shop around for the best combination of coverage, service and price for you.
- Consider a Business Owner’s Policy. Business owners can buy the insurance coverages they need separately or in a package called a business owner’s policy (BOP). Purchasing separate policies from different insurers can result in higher total premiums. A BOP combines typical coverage options into a standard package, which the insurer offers at a lower premium than you can find if buying each type of coverage separately. Typically, BOPs cover property, general liability, business interruption and other types of risk exposures common to most types of businesses.
BOPs simplify the insurance-buying process and save you money. They can also help eliminate any coverage gaps that might exist when you have separate policies renewing at different times. However, make sure you understand the extent of coverage in any BOP you are considering. Not every type of insurance is included in a BOP. If your business has unique risks, you may require additional coverage.
- Find an Experienced Agent. Commercial insurance brokers can help you find policies that match your business needs. Make sure your broker understands all the risks associated with your business.
Finding a good insurance agent is as important as finding a good lawyer or accountant. State governments regulate the insurance industry and license insurance brokers. Many states provide a directory of licensed agents.
- Assess Your Insurance Coverage on an Annual Basis. As your business grows, so do your liabilities. Don’t be caught underinsured should disaster strike.