BY ANDI GRAY & ROBYN GOLDENBERG COHEN
Dilemma: We have an insurance renewal coming up. We know prices are on the rise in general. On top of that, we’ve had a couple of claims, which we’re sure will hurt us. We need help and we’re looking for recommendations.
Thoughts of the Day: Know what kinds of risk you want protection from. Lower risk by making constructive changes to how you conduct business. Decide how much risk you’re willing to shoulder.
Since different types of agents and brokers sell different types of insurance, it’s important to put together a well-rounded team who can provide sound advice on a variety of concerns, like risk exposure, risk-reduction programs, and insurance options.
In case your building gets damaged, are you insuring the building or just the contents? What if people get hurt on your property? Staff encounter road hazards while running errands for the business—does your coverage protect them?
Worried about getting sued? You might want a policy that covers out-of-court settlements as well as attorney expenses, litigation, and court judgments. What about an employee who damages property or harms another person? What if someone claims you gave them bad advice? Think about copyright violations and other marketing or production errors.
Property insurance, casualty insurance, commercial insurance, liability insurance, health insurance, workers’ compensation, state disability, Social Security disability, and unemployment insurance—there are so many types of insurance that it can make your head spin. Some are mandatory, some are strongly suggested, some you pay for, and some the employee pays for. The following are especially crucial to understand, so you can protect your company, assets, and employees:
• Property and casualty insurance covers the physical location of the business, even if you rent or lease the space. Usually this type of insurance covers events like fire, theft, floods, and natural disasters. Casualty insurance covers the operation of the business, but property and casualty are often lumped together.
• Commercial auto insurance covers your business for loss or damage to vehicles used by the business, and damage to other’s vehicles caused by your business vehicles. Transportation operators are intimately familiar with this type of insurance.
• Liability insurance covers you in the event that someone sues you for negligence—for example, if an individual falls or gets otherwise injured on company property.
• Business interruption insurance can help make up for lost profits if there is an event that interrupts your normal business operations.
• Health insurance—a hot topic these days—ensures that health coverage is provided to you and your employees, and there are both federal and state laws that come into play regarding what you as a business owner have to or don’t have to offer.
• Life and disability insurance covers your business in the event of a death or disability of key owners, partners, or employees.
• Workers’ compensation insurance is mandatory, by law, if you have employees. You must participate in a workers’ comp program. This type of insurance covers employees if they are injured on the job.
• Cyber liability insurance can offer your business some protection if sensitive data is stolen or compromised.
Knowing what insurance policy kicks in during a specific incident is crucial. For example, life insurance protects those who are left behind—including the business—when someone dies. It provides liquidity, something most survivors and businesses require to move past times of distress. Life insurance can be used to buy time as you search for solutions. It takes care of people and functions within the business, and can be used to bring shares back to the company.
Bonds help secure performance and compliance. Bonds can protect you from another firm’s default or insure that you will perform as promised. Two of the most common types of business bonds are fidelity bonds and surety bonds. Fidelity bonds protect the policy holder for any losses they may incur in the case of employee theft, while surety bonds are contracts that guarantee your performance to another party, or vice versa. These can be a bit more complex, and require further research with an insurance professional.
If you’re shopping for insurance, ask peers for referrals and check their references. Choose an insurance professional who is licensed and has a clean ethical record: This is not a time to compromise. Once you find a broker who fits your needs be honest and forthright about problems and concerns you may have. Make sure they understand your type of business, and the risk it may incur. Work with them throughout the year.
If you want to share risk, expect to treat your insurance companies, agents, and brokers like business partners. Educate them about your business. The best way to make an informed decision about choosing the right insurance company or professional to work with is to know exactly what your business does, as well as your plans for the future growth of the business. Do some research on the types of coverage your business might need.
It’s human nature to avoid problems. But the less you know about a subject, the greater your risk. That’s especially true when it comes to insurance. How well can you protect your business? From cybercrime? How about burst water pipes? Employee accidents? What if you lost your office or warehouse? What if employees couldn’t come to work? You need to have a backup plan in place while you have the time to consider your options.
Lower insurance costs by writing out a risk mitigation plan. Identify and eliminate root causes. Train employees, vendors, and customers how to avoid and respond to problems. Look to state agencies for assistance on training. Set goals for injury-free days. Measure days without claims. Be proactive.
Keep in mind that entrepreneurs are inherently risk-takers who tend to assume bad things will happen to the other guy. And they’re sure they’ll be able to work through problems that happen to them. But why put an otherwise healthy business in jeopardy? Insurance is another cost of doing business. Get an understanding of the costs and benefits. Sell your customers on the fact that insurance means your business is a safe, well-run solution that will continue to be here for them. [CD1116] Looking for a good book? Try “Business Insurance Basics: An Entrepreneur’s Guide to Buying, Understanding, and Managing Insurance” by Scott Walton.
Andi Gray is the Founder of the business consulting firm Strategy Leaders. She can be reached at andi@strategyleaders.com. Robyn Goldenberg Cohen is Director of Operations and Marketing for Strategy Leaders. She can be reached at robyn@strategyleaders.com.