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Save money while ensuring you have enough insurance coverage.
Insurance is not cheap. That’s a fact of life. Another fact of life is that to run a business without adequate insurance coverage is asking for trouble and risking your future.
Since many small businesses, especially those in the start up stage do not have adequate profits to cover all the expenses they ideally should, insurance is often the prime sufferer because it is easy to believe that bad things will happen to someone else. But if you are realistic, you will understand the need for insurance.
There are some things you can do to save money on business insurance. It does not mean reducing your risk coverage – that would be foolish. What it involves is common sense and an understanding of the risks that your business faces.
- The first thing to do is to list out all the types of insurance you are required by law to have – for example workers compensation insurance. Budget for these – you have no choice. Now list out, in order of importance the type of insurance your business should have. And the coverage against each type of risk. Divide these into two categories – Essential and Desirable.
You will need to find the money to take the essential insurance policies immediately. The others can wait – for a short time – till your company’s finances can afford it. Among the essential insurance policies would be business interruption and property damage. Perhaps health insurance could wait for a while.
- Most policies will have a deductable amount – the amount you pay yourself after which the insurance policy will kick in. The higher the deductible, the lower the premium. Examine if you can afford to go in for higher deductibles in some areas.
- Compare rates and go with the lowest, as long as the insurance company has a good reputation of paying up on claims.
- Whenever a policy comes up for renewal, check around and see what the market rates are. Often rates will drop and your old rates may now be way outside the going insurance rates.
- Talk to your insurers about a reduction in premiums if your business has a well- defined and properly operational risk management and loss reduction program. Many companies will reduce their premiums if they are satisfied about the precaution a business is taking.
- Look at spreading the risk. Talk to you suppliers about their indemnifying you for losses caused by their equipment or for any delays of defects on their part. This could significantly reduce the amount of insurance cover you will need
- Look at package policies that cover various aspects of your business. These are often cheaper than taking out a number of specific policies. However, make sure that all your risks are covered and that the limits are not too low to do you any good.
- If you are a member of a trade or business association, talk to them about group plans they may already have or about going in for one for their members. Insurance companies reward the large volumes they get by insuring the members of an association by lowering the premium rates. But once again, since you will be going with a group of other companies, make sure that your individual insurance needs are not compromised.
- If your business is labor intensive or involves hazardous work, examine the possibility of sub contracting a portion of your operations. As long as the contractor is properly insured – insurance that covers his workmen also – you could reduce the amount of coverage your need.
- If you have multiple insurance policies from the same company, talk to them about multiple policy discounts. Many insurance companies reward customers who come to them for additional coverage by offering discounts as a kind of loyalty bonus.
Insurance is not cheap, but with some sensible planning and a bit of research, it is possible to cut your costs and save money on business insurance.
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