Good planning is a key ingredient to successful business growth. Business insurance is an integral part of the financial plan for any business since it provides an affordable way to fund large unexpected expenses that could wipe out the cash flow needed for sustained growth.
When renewing business insurance don’t just shop for the lowest price and check the box for completing this task. It may come back to haunt you later. Instead, review coverages periodically to make sure they are keeping up with your business growth and any other changes in your business.
Reviewing coverage needs with a trusted and knowledgeable agent should help you identify potential gaps as well as unnecessary expenses. Here are some of areas to cover during a periodic review of your business insurance policies.
Begin by verifying business and contact information such as addresses, phone numbers and emails should remain current to avoid missing important communications such as bills, requests for information and audit requests. A good way to do this is to review a copy of the latest insurance applications you submitted.
Insurers set commercial insurance premiums based on the products and services provided by the insured as well as geographic service area, insurable assets, sales, payroll and number of employees. When your business grows these metrics will also increase. Since commercial policies such as General Liability and Workers Compensation are subject to audits that can go as far back as 3 years, it’s always a good idea to keep this information current in your insurance company’s records.
In the event of an audit, a discrepancy between the information provided in the application and the audited information such as a significant increase in payroll may trigger a large unexpected bill. On the other hand, certain policies will provide a refund when the discrepancy favors the client.
If a business is planning to add new products or services or expand its geographic service area, this information needs to be provided to the insurance company before implementation to ensure coverages are modified accordingly and avoid any surprises at the time of a claim.
After a few years of having insurance in place, business owners may be unaware of gaps that may have developed over time. Reviewing coverage needs should help you identify coverages that are falling short as well as coverages that may be redundant. You should focus your insurance budget on protecting against risks that while unlikely could result in a large claim that could put you out of business.
On the other hand, you should consider other strategies for likelier risks that while painful could be absorbed without impairing the future viability of your business. For these types of risk consider eliminating coverages or raising deductibles. Another cost-efficient way to address these risks is to have a contingency fund in place.