One area small business owners often neglect is the periodic review of their business insurance coverage. These are the policies that cover business operations and human & capital assets. I recommend a detailed review every 2-3 years or after a significant event, i.e. sale of a division, acquisition of another company or division, layoffs or an industry-wide change. The review usually uncovers both potential savings and areas where coverage is thin. Any significant gaps in coverage that might be costly can be phased in in some cases.
A few key points to keep in mind when conducting an insurance review:
- It is imperative you be honest with the broker. If you aren’t you risk less than adequate coverage in the event you suffer a loss.
- Invite the insurance company’s loss prevention specialist to review your physical plant. They can point out ways to make the work environment safe, minimizing risk with practical suggestions that don’t require additional coverage often times.
- Invite the appropriate department managers to participate. The information will be more accurate and they develop an understanding of how to protect against loss.
- Work with a broker that understands your business and your industry. I don’t recommend a family member or the agency down the street that does any and all types of businesses. If in doubt get referrals from your industry trade group or even your competitors.
- Ask the broker to suggest ways you can save on premiums. Sometimes changes in deductibles and limits make a big difference.
- Ask the broker to present the results of the review and any changes in coverage to you, members of your management team and your board or advisory board if you have one. They are better at presenting this complex information.
- Read all the fine print to know what is excluded. If in doubt, don’t pay the premium until you are satisfied (but don’t lapse the coverage either!).
Final thoughts: it never pays to go without coverage. If you suffer a loss it could wind up costing your company more than the premium in downtime, loss of life, key data etc. It also doesn’t pay to switch brokers and insurance companies often in search of lower premiums. Longevity can work to your advantage when you do have to process claims.
