Insurance Costs for Small Businesses

As small businesses continue to operate within a currently troubled economy, it is important to reduce costs in any way possible. One way that companies can save money is by lowering their insurance costs. Here is a step-by-step guide to reducing insurance premiums while still maintaining full coverage for your small business.

It’s highly important for all small businesses to make sure that they have the insurance coverage that fits their business needs. However, in many cases, companies will pay for extra coverage that they don’t necessarily require. Below you will find 5 important steps to take that will help you identify the perfect balance between coverage and price. Remember to look at rates from competing carriers — and keep in mind that price does not necessarily dictate quality — along with other strategies of reducing your premiums. Follow these guidelines to receive the most bang for your buck.

1. Make Sure to Buy Adequate Coverage

In order to guarantee that your business is covered on all sides, it is important to identify the types of coverage that is needed. Even one small lawsuit or difficult event can be detrimental to the future of a small business, before they may have had the chance to get their operation of the ground. Prepare for all situations that may arise by obtaining the multiple types of coverage that you may need. Below is a list of 7 types of insurance that may be worth investing in.

1. Professional Liability Insurance

Liability Insurance (also called errors and omissions insurance) provides coverage for any business that reduces risk exposure. In industries where you, your employees or your products or services may potentially cause harm or damages to the third party you are servicing. With liability insurance, small businesses can ensure their company’s protection in case they are sued for negligence.

2. Property Insurance

If your small business is leasing or has purchased a space to conduct its operations, it is important to obtain property insurance. Property coverage will protect equipment, signage, inventory and furniture in the event of a fire, storm or theft. Yet, it is important to note that most property insurance does not cover mass-destruction or catastrophic events such as earthquakes and floods. Thus, if your location is at high risk for natural disasters, it is wise to price a separate policy that covers these events with your insurer.

3. Workers’ Compensation Insurance

If your small business has even one employee besides yourself, it is essential to invest in worker’s comp insurance. These policies cover medical treatment, disability and death benefits in the event that an employee suffers from a work-related injury or fatality. Even if employees are performing menial or low-risk tasks, slip-and-fall injuries or medical conditions like carpal tunnel syndrome could result in a high-priced claim.

4. Insurance for Home-Based Businesses

If you conduct your business operations from your home – as many small businesses do – it is important to recognize that traditional homeowners’ insurance may not provide you with coverage for your company needs. Be sure to take your business into account when discussing policies with your insurer, covering any equipment or inventory in the event that issues arise.

5. Product Liability Insurance

If you are manufacturing physical products for general sale, product liability insurance is a must. Regardless of how big, small, or potentially dangerous those products may be, there is always the chance of finding yourself faced with a lawsuit due to damages caused by your products. Your insurer will tailor your liability insurance specifically to cover the products that you are selling.

6. Vehicle Insurance

If your small business provides company vehicles to employees, whether for travel or transportation of products, commercial auto insurance should be considered essential. Depending on the type of policy, vehicle insurance typically covers accidents that may cause damage to a third-party, and even can cover damages to your own vehicles. If your employees are using their personal vehicle for business transportation, they will likely be covered by their own personal insurance. However, it is important to note that if employees are delivering goods or services for a fee, their own personal insurance will not cover accidents or damages.

7. Business Interruption Insurance

As the rate of natural disasters has been on the rise, considering business interruption insurance may be wise. Most standard insurance will cover the damage or loss of physical property but will not account for the loss of profits caused by the disruption of operations. Business interruption insurance will take into account your net income to reimburse your small business for a portion of lost profits.

2. Consider Multiple Types of Bundles

Often, when purchasing commercial insurance for your small business, you can choose a policy that covers multiple areas of your business needs. For example, a business owner’s policy (BOP) will combine multiple types of protection (such as business interruption, property, and general liability insurance). Bundles like these allow you to combine coverage into a single plan that is often priced lower than purchasing policies individually.

Another way that you can bundle coverage for your small business is by finding a policy that not only covers your commercial insurance, but your personal insurance as well. If you are operating with limited employees or are just starting out, many insurance providers offer price breaks when you purchase other lines of coverage, such as home or auto insurance, in addition to your business insurance.

3. Raise Your Deductible

It is important to be aware of the relationship between your deductible and your premium. Simply explained, the lower your deductible is, the higher your premium will be. Thus, finding ways to increase your deductible will allow you to save by ultimately lowering your premium.

Remember that you will have to pay your deductible before you make a claim, so only increase your deductible to an amount that your company can afford in the event that it is necessary to make a claim. Larger corporations may be able to manage higher deductibles that cost thousands, while small companies may be operating on a tighter budget and desire more limited business insurance costs.

4. Look for Discounts

When finding the insurance policy that is right for your small business, always be sure to ask about discounts. In many cases, trade associations within your industry are aware of ways to receive cost reductions and can help you identify them. Furthermore, there are a variety of insurance providers that specialize in specific industries, thus offering policies that cover your exact needs for lower rates.

Additionally, there are often discounts that are given to people that do not file claims. If your company has been claim-free for several years, insurance providers will in many cases offer a claims-free discount. Try to avoid filing smaller claims if possible, as to keep your record clean and increase your eligibility for discounts from your insurance carrier.

5. Be Proactive and Improve Security Precautions

When choosing a policy, be sure to discuss with your provider the ways in which you can reduce risk for your small business. Risk can be lowered in a number of ways, such as starting a workplace safety program, instituting disaster preparations, initiating a theft-prevention plan, and creating cybersecurity protocols. If you take precautions like these, will you will reduce the risk of a claim and possibly receive a more cost-effective insurance quote from your carrier.

In addition to establishing risk reduction programs, in order to maintain the safety of your work environment it is essential to properly categorize your employees. If your business is part of high-risk industry, where employees run the risk of injury, it is important to disclose this information to your provider. When speaking to your insurance agent, avoid downplaying possible dangers and risks because you may ultimately find yourself without coverage when you need it. Also, it is crucial to inform your insurance company about incoming employees as well as those who have left or been terminated, as this will likely affect the price of your premium.

Always remember to be proactive and anticipate potential risks for your small business. Your provider may be able to provide you with tip sheets, safety trainings or even formal programs for risk management to protect your business and increase your eligibility for a premium credit.

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