Business Insurance in Contingency Planning | Wednesday December 31st, 2003 | |
How can I use insurance in my contingency planning? What coverages should I consider?
If you are interested in expanding your business and refining its stability, you will need to carefully review your insurance policies and make sure that they adequately protect you in case of mishap or disaster. With the help of an insurance company, broker or agent, you will be able to consider specialized coverages to help you secure the future of your business.
You know what insurance is, but how do you pick an insurance company to cover your small business? You will need to assess what your insurance needs are before you start investigating insurance companies, brokers and agents. What sort of property insurance do you need to carry? What are your liability risks? Would it be financially beneficial for you to carry a general Business Owner’s Policy (BOP)? After you have determined what types of coverages your business will probably need, talk to other small business owners about the insurance company or agent they secure their insurance through. Pay attention to the opinions of other business owners—they have experience with insurance companies, and their input will probably be worthwhile to you.
One of the most important things you will need to discuss with your insurance agent are your policy deductibles and premiums. You may want to consider high-premium, low-deductible insurance policies if your business is particularly at risk for a certain type of loss; this way, you can pay a high one-time premium and a low deductible each time a loss occurs.
For Example:
You own a construction company that employs transient seasonal employees, and are at a high risk for loss of machinery and equipment. When setting up your insurance policy, you agree to pay a large once-a-year premium, and only a $25 deductible each time a loss occurs at your business. By setting up your policy this way, you pay a larger premium but still save money by having a low deductible for each loss. On the converse, if you are at low risk for a certain type of loss, you may want to retain insurance for which you pay a low one-time premium and high incidence deductibles. By doing this, you do not pay much for a loss you will probably not incur.
Before meeting with your insurance broker or agent, you may want to look over insurance policies of other small businessperson’s in your industry. Ask them what they have done about insurance coverage, and what they have found to be effective for their business. Make a list of any questions and concerns you might have so you can raise them with your insurance agent.
You will also need to check with county, state and federal authorities to find out what insurance coverages your business must carry. Your insurance agent or broker should be able to help you find this information. It is also worthwhile to check with any suppliers, contractors or other businesses to find out what kind of insurance coverage they require you to carry before they work with your business. When gathering this information, keep in mind the types of insurance you would like people you work with to have, and talk to your insurance agent about drafting regulations and agreements regarding this.
As a medium business owner concerned with the growth and expansion of your business, you will also need to consider how you can use your insurance coverage in your contingency planning. What happens to your business if you are sued? If your equipment is damaged or loss? If a fire destroys your property? By securing the appropriate types of insurance, you can assure that your business will retain stability even in case of a mishap or disaster.
You may want to check into types of insurance that are specific to your industry or situation, such as rent and business interruption insurance. By securing types of insurance specific to your industry and personal situation, you can insure that your business will continue even if you become ill, can no longer run it, or pass away. Planning ahead is always a good idea—it will save you, your family and any business partners you might have time, money and headaches in the long run.
Discuss your long-term goals with your insurance company, broker or agent. She or he should be able to help you determine what types of insurance will help you accomplish your goals and protect your business. You may also want to talk to other successful business owners in your industry and geographical area to find out what types of insurance coverages they use, and how they have integrated them into their business’ contingency plans.
Finally, don’t be afraid to ask questions when you meet with an insurance broker or agent. As an independent businessperson, no one will expect you to know everything about insurance, and it’s better to ask a hundred questions before you buy your policies than to buy policies you do not understand and cannot use effectively. Remember that insurance will be essential to your business, so take your time to review policies and guidelines, and talk to your agent or broker about any concerns you may have.
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