Am I Overpaying for My Business Insurance?

Think of your small business as a machine made up of several key elements that all work together to keep the engine moving. Sales, marketing and business development, accounts receivable, hiring - all of these elements come together to help a business grow and become successful. However, in order to grow they rely on the support of some solid foundational pillars of support. A strong lease, a solid partnership agreement, contracts and policies - these elements all help support the roots of a business as it grows. Few pillars though are more important than having the right business insurance.

Business insurance is not a ‘one-size-fits-all’ solution. There are several types of insurance available for business owners, all of which work to provide different aspects of their enterprise. For example, business owners may require:

• General Liability Insurance: Will cover bodily injury or property damage (slips and falls), product liability, and can extend to frivolous lawsuits as well

• Building / Contents Insurance: This protects your property, and may be required under some leases (but generally desired by business owners, especially to protect investments)

• Commercial Vehicle Insurance: This covers any vehicles owned by the business and is usually required under the law

• Workers’ Compensation Insurance: This is usually required for employees who are not your family, and can be purchased through private carriers

While possessing business insurance coverage is crucial, as a small business owner you are also operating on a restricted budget. So, how do you know if you’re overpaying for business insurance, and how do you avoid doing so in the first place?

Business Insurance Rates Factors: What affects your rates?

No two businesses are the same, and no two will need the exact same insurance coverage. Similarly, no two businesses may pay the exact same rates, since there are multiple factors that can impact a business’ insurance rates.

A business will receive an insurance quote based on what it does, and what it owns. More specifically, the type of business that you are conducting will determine your rates, but so too will your facilities, machinery and equipment, etc. A business in a century-old heritage building will likely pay different rates than one operating from a brand-new modern facility. Similarly, a business that owns expensive, complex machinery will pay different rates for property insurance than one only looking for coverage for their basic office furniture.

Insurance companies will also look at a business’ history with insurance in order to determine their rates. Is the business new to obtaining coverage, or does it have a longstanding history? Have there been any previous claims made under previous insurance coverage? Does the business have a good credit history? Have they elected to take on a larger deductible?

Questions to ask when buying business insurance

Before buying business liability insurance, business owners should turn their minds to some key questions to discuss with their insurance provider, so that they can enter into their policy fully informed. These questions can include:

• What specifically is covered under my insurance policy?

• How do I go about submitting a claim?

• Do I have enough insurance to cover my risks?

• Are there any gaps in my coverage? Will I require additional coverage?

• What additional policies are available?

• Will my rates for insurance ever change?

• What can I do to better protect my business and keep my rates low?

Along with asking these questions, it is important that anyone looking for small business insurance take the time to properly read and review their policies, since any questions about coverage will ultimately be settled by whatever is in the fine print.

What can you do to avoid overpaying for business insurance?

As a business owner you may require insurance coverage, but where you obtain that coverage and what you do with it is in your control. Take the time required to do your homework! Shop around through various resources, ask for recommendations from friends and colleagues, and take time to review quotes. The first quote that you receive may not be the best one for you!

Once you have coverage, it is critically important to make sure that your insurance provider is ‘in the loop,’ so to speak. Make sure that your business is classified properly, and that you are carrying the correct insurance. If your business activities change, make sure your insurance provider is aware and covers you properly. You will likely not be covered if you enter a completely new area of your business without first notifying your insurer of the change. Similarly, look into how you can automate any of your business processes, to reduce the chances for human error and potential for claims.

Remember though, spending less for insurance should never come at the expense of protecting your business. A less-comprehensive policy or avoiding certain coverages may look tempting on a tight budget, but will cost significantly more when it comes time to make an insurance claim.

At Foxquilt, we use technology to offer comprehensive small business solutions that won’t eat up your time or budget. We offer technology-based solutions to busy entrepreneurs that allows them to access the insurance coverage they need to be successful. Start a quote with us today.

Contributed by Scott Wilson, Vice President of Business Development at Foxquilt