Financial Literacy Month is a good reminder that understanding your business finances goes beyond knowing what comes in and what goes out.
It also means understanding what your business could afford if something unexpected happens.
For many small business owners, insurance is another line item in the budget. But looking only at the premium can miss a bigger financial question: Would your current coverage reflect what your business has become today?
When your business grows, your risk can grow with it
A lot can change over the course of a year. You may purchase equipment, carry more inventory, expand your operations or see the value of your business property change.
Those developments may be signs of a healthy, growing business, but they can also change your insurance needs.
A policy arranged when your business was smaller may not reflect the business you operate today. That's why regularly reviewing your insurance can be an important part of managing your company's financial risk.
Know what you're paying for
Financial literacy is about making informed decisions, and insurance should be no different. Instead of looking only at "How much is my premium?", business owners can ask:
- What does my insurance protect?
- Has the value of my property, equipment or inventory changed?
- What are my policy limits and deductibles?
- Could my business comfortably absorb the deductible after a loss?
- Have changes to my operations created risks my existing policy may not address?
- Do I understand the important exclusions in my policy?
Understanding these basics can help you have a more productive conversation about your business's protection.
Make insurance part of your financial checkup
This Financial Literacy Month, consider adding insurance to your business financial review.
Take stock of how your business has changed and speak with your insurance broker about whether your current protection still reflects your operations and exposures.
Because being financially informed isn't only about preparing for your next opportunity. It's also about understanding the risks that could affect everything you've worked to build.
In the know
As your business changes, your risks can change too. Knowing what you're insured for, and what you're not, is an important part of understanding your business's financial health.
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