DOs AND DONTs
Do make sure your business insurance company has experience in your industry. The more the insurer knows about your industry, the more confident you'll be that it can provide a cohesive business insurance program that minimizes gaps in your protection.
Do make sure your business insurance program covers all the basics. Today, most midsize companies need:
- Property insurance including equipment breakdown,
- General liability coverage, including product liability insurance,
- Motor insurance
- Workers' compensation insurance, and
- Professional liability insurance.
Depending on your industry as well as your specific business operations, you may also need to consider specialized commercial insurance coverages, such as fidelity guarantee, money, bonds and securities, directors and officers liability insurance, goods in transit insurance, and marine insurance.
Do make sure you keep an inventory of all your property in a safe place, preferably off premises. Whenever possible, include photographs of your property and your inventory lists. If you ever need to report a claim, this kind of documentation can prove to be invaluable.
Do check on the financial stability of a business insurance company before purchasing a policy. Also consider the insurer's reputation and integrity as well. If you're going to put the future of your business in its hands, you want to make sure it has a solid history of paying claims. Remember in insurance size matters and a healthy balance sheet is vital.
Do buy an insurance policy that will pay the replacement cost of any insured property. If you only insure your property for its current book or actual cash value, you may not have the necessary funds to replace damaged property.
Do make sure your policy would cover your liability for damage to space you rent, even if your lease doesn't require it. Often, the building owner's policy won't cover damages to the building caused by the negligence of your employees, leaving you exposed to property damages and liability risks.
Do check on the insurer's claims services. Does the insurance company have a reputation for paying legitimate claims with a minimum of stress? Are its claims representatives responsive to customers' needs in times of crisis?
Do ensure that you revise your workers' compensation insurance to reflect changes in your payroll. Though it is not mandatory that you have WCA coverage, the ongoing financial health of your company and ability to retain employees may depend upon how effectively you can take care of injured workers. As you grow, it's important that your Workers' Compensation protection increases to reflect your potential exposure.
Do confirm that your sub-contractors carry their own workers' compensation and liability insurance. If they get injured on the job, or if they injure one of your customers, you need to be sure they are capable of paying for that loss.
Do protect your business with more than just general liability insurance, including:
1) Products liability insurance (appropriate for any business in manufacturing)
2) Professional liability insurance (to protect you against claims of professional misconduct/negligence)
3) Directors and officers' liability insurance (even if you're not a publicly traded company).
Do consider buying all your business insurance policies through one reputable insurer. That can help to ensure your cover fit together more seamlessly, without costly gaps or overlaps. It can also streamline the process of filing and settling claims, since you'll only have to deal with one insurance company.
Do be sure you work with a qualified, professional licensed insurance agent with a reputation for delivering quality service.
Do inform your agent of changes to your business, so that your business insurance policy always provides adequate coverage.
Don't underinsure to get a reduced premium. If you skimp now, you could really pay later. A lower limit means less financial protection when a loss occurs.
Don't hide or misrepresent unusual risks from your agent. Sometimes a failure on your part to disclose a risk can result in a denial on the part of the insurance company to cover a loss. Better to know you're protected now, than find out later you're not.
Don't assume your business' theft coverage will extend to the personal property, tools, or equipment used by your employees. Make sure your policy includes provisions for theft of employees' tools.
Don't assume that "malpractice insurance" or professional negligence is only for doctors and lawyers. These days, almost any professional can be sued for something they did or didn't do.
Don't skimp on errors and omissions coverage if your business needs it. While these types of claims may be few in number, they're often huge in impact. Just one professional liability lawsuit can wipe out an entire business.
Don't overlook the policy's "exclusions." It's just as important to know what you're not covered for as what you are. Be sure to ask your agent about standard policy exclusions and whether specialty insurance is available. If need be ask for an extension or separate coverage
Don't just focus on reducing the cost of your insurance. Look for ways to reduce the likelihood of losses. Remember, your renewal insurance premiums will typically be based on your loss history. So the best ways to control your ongoing costs is to limit your yearly losses.