Having business insurance is like owning a car. You need to check on it periodically to ensure it’s still “running” properly. Below are some crucial items to evaluate; your Gallagher representative can help guide you through this process.
Why Do Businesses Need Insurance?
Business owners buy insurance for many different reasons. Common ones are to cover property damage, pay for an attorney during litigation and cover the costs of a data breach. However, circumstances often evolve. New business risks emerge or existing ones shrink. When your needs change, your original insurance might stop serving its intended purpose. Reviewing your policies prevents this from happening.
Which Insurance Policies Should You Review?
The quick answer? All of them. However, if you’re pressed for time, concentrate on these four:
- Commercial property insurance
- General liability insurance
- Business owner’s policy, commonly known as BOP (combination of prior two)
- Workers’ compensation
These policies are essential to review because the risks they address can change rapidly. For example, your commercial property insurance will need updating if you lease more space or move to a new building. You may add products or services to your offerings, increasing or decreasing your liability exposure. In either case, take a close look at your general liability coverage. Or you might hire more or different classes of employees, necessitating a review of your worker’s compensation insurance. The key takeaway? As your business changes, your insurance policies must keep pace.
What Are the Main Reasons to Review Your Policy?
After you retrieve your insurance policies, ask yourself the following questions:
- Are my coverage limits still sufficient? In the early days of your business, limited coverage might have been all you could afford. But your business and financial resources may have grown over time. Consider increasing your policy limits to safeguard your growing company.
- Have I upgraded my office or workspace? Your current insurance may only partially cover damage to your expanded facility. Raising your property damage limit ensures your insurer will pay to repair property damage, not you.
- Have I added new products or services? Since insurers issue errors and omissions (E&O) and professional liability insurance to cover specific business activities, they might only cover new ones once you let them know.
- Have I purchased new big-ticket equipment? Large purchases typically require adjustments to your commercial property insurance, such as adding breakdown or short-circuit protection.
- Did I add employees recently? Time to adjust your employee benefits, workers’ compensation and commercial auto insurance. A workers’ compensation review is especially critical, since states often peg coverage requirements to the number and type of employees you have. Also, hiring more staff increases your fraud risk. You may now need a larger fidelity bond to fully shield your firm.
- Have I downsized staff? Saving money on your employee benefits and workers’ compensation insurance is now a possibility.
- Have I changed my company’s legal structure, added new executives or revised my business model? If so, think about modifying your general liability insurance and directors’ and officers’ insurance.
- Have my sales grown significantly in the past year, either in terms of revenue or asset acquisitions? If yes, you’ll need to beef up your general liability insurance.
- Have I purchased one or more business vehicles? You probably already notified your insurer. But did you adjust your commercial auto insurance limits?
- Will I soon host a special event? If you’re holding an event to launch a new venture, celebrate a company milestone or motivate employees, see whether your current liability insurance covers the risk exposure. If not, consider purchasing event and party alcohol liability insurance.
What Are Other Reasons to Review Your Insurance?
- Have I assumed new contractual liabilities? This includes granting indemnities or signing a hold harmless agreement. These actions have insurance implications.
- Have I modified my business premises? If you lost a building tenant, demolished your space or made improvements, inform your broker and insurer as soon as possible.
- Am I paying too much for insurance? Did you buy your policy when rates were generally high or your insurer, for some reason, couldn’t offer you a competitive price? Either way, review your current policy with your broker to ensure you’re using your money wisely.
- Is my business seasonal? At the end of each cycle, consider doing an insurance review to identify how your business risks changed. When threats to your business grow or shrink, you should revise your coverage.
- Have I entered into a new contract? Signing an office lease, borrowing money to finance goods, taking out business loans or signing agreements with customers or suppliers all pose significant legal risks. Some contracts may require you to maintain certain types and amounts of insurance or add a company employee to your policy. Whatever the contract details, be certain your insurance protects you if your deal goes bad.
- Have I added a business or expanded my online marketing? Then check to see how much cyber protection (if any) your current E&O or professional liability insurance provides. If the answer is slim to none, consider purchasing a dedicated data breach and cyber liability policy.
- Am I experiencing more frequent extreme weather events? Then ask your broker if you need to beef up your property damage insurance or buy more flood coverage.
- Am I taking advantage of all available policy discounts? Owning multiple policies with the same insurer may qualify you for substantial cost savings. Check with your broker to make sure you are getting everything you deserve.
- What happens if I don’t comply with small business insurance? If something changes in your firm, regulators or customers may require you to purchase insurance. If you don’t comply, you might face government fines or penalties or lose a business opportunity.
Bottom line? Never stash your insurance policies in a drawer and forget about them. At least once a year, reconsider your major risk exposures. Then decide whether your current insurance is still protecting you. If it isn’t, review your insurance coverage with your broker.