Business Insurance- What you SHOULD know!
This month we wanted to bring together important elements of business insurance that many of us frankly do not understand. Ignorance is okay, except when it starts costing you money. We want to share with you the following, courtesy of Eric Dougal and Torean Greeley of Hub International and Simon Insurance, respectively. Both of these gentlemen have a wealth of knowledge in the business insurance arena and have taught us a lot. Thank you gentlemen!
Now let’s get down to business. We are going to review the following key areas:
- Basic coverage every business needs (by type industry).
- Key elements that need to be specified and are not included.
- What are the most common failures of business owners when selecting insurance?
- What is the underwriter looking for?
- Key questions to ask.
Many of us think business insurance is pretty standard and we just have to have it like automobile insurance. However, there is no such thing as standard coverage. This is not a commodity but a customized way to manage the risk to your business. Key elements like business interruption are critical. Did you know that after the flooding in Houston that 70% of the businesses that did not have interruption coverage on their policies never re-opened.
Like we previously stated, business insurance is not a commodity but is a customized solution. Every business has differing needs. For example, exclusions under general liability coverage might include professional services, pollution and product recall. All three of these coverages may be important for some clients especially if you are a manufacturer.
A big item today is cyber insurance. The best way to know if you have the correct coverage is to meet with your agent. Spend time sharing your concerns (things that keep you up at night). Look at different insurers at least every 3 years. Ask how many of the companies clients are “like” businesses as compared to yours. You can learn a lot from the agent. This also holds true for your other key service companies like CPAs and attorneys.
Most common failures-
All too often price is the driver when sourcing your insurance. But just like automobiles, options and performance have a big effect on the price. Do not be fooled. Here is an example of how an insurance policy might be less expensive but not be a good solution. Think about the cyber insurance issue mentioned above. Many policies have exclusions or sub-limits, which are reduced limits that can often times reduce your coverage. Imagine purchasing a $1M cyber policy and then at the time of a breach finding out you only have $25,000 coverage for forensic work or social engineering fraud.
What does the underwriter look for?-
The underwriter is key in calculating the risk of insuring your business. If you participate in programs offered by them or similar programs you will likely see lower premiums. Examples are safety programs, risk reviews, approved background checks, etc.
Questions to ask-
- Can you (the agent) explain to me the coverage and how each incident would be handled?
- When making a claim, how quickly will you be paid? Many businesses do not have the excess cash to pay for the repairs or other expenses out of packet and wait to be paid.
- Do you have a reference that I could speak to that is a similar business?
- How are residual claims paid or covered? This is something we often overlook.
- How can we adjust my coverages to match my ability to self-insure? Higher limits or deductibles.
This topic is very detailed. It deserves much more but hopefully we have raised enough questions for you to re-think how you purchase and select your business insurance coverage. Make sure your business is here tomorrow!
SPC Consulting is a management consulting firm dedicated to making our clients successful by helping to develop sound strategies, building your culture and helping you implement appropriate business processes.
Do not hide but reach out today to your agent or one of the agents above to get the knowledge you need.
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