Advice on buying business insurance

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In terms of insurance, it was a difficult year for small businesses, pandemic losses who were not covered to scramble to file looting and fire damage claims. So there’s never been a better time to take stock of your business insurance, to make sure it’s up to the job.

An additional incentive to review coverage is the prospect of the cost and availability of business insurance. While 2020 premium increases have been minimal for most types of commercial insurance, according to Christopher J. Boggs, executive director of risk management and education at Independent Insurance Agents & Brokers of America, some policies have become more expensive, like those for Vehicles. With natural disasters and riots costing the industry billions in claims, as well as some fallout from the pandemic, Boggs says rates are expected to continue to rise. He also believes underwriting standards could tighten, making it more difficult for some companies to get policies.

Insurance, including business interruption coverage, is a must for most small businesses, as those who were uninsured or underinsured in 2020 have discovered the hard way. Read on for a few things to avoid when buying business insurance, as identified by the experts.

Familiarize yourself with your coverage before you need it

Not knowing in advance what your business is covered for and what it means to file a claim can all too easily lead you to search for insurance documents as you face a business disaster. (Witness some coverage by insurance industry publications of store owners learning about claims requirements as they sifted through looting damage.)

Indeed, understanding what is covered and what is not covered in their policy was one of the main challenges faced by small business owners, according to a recent study by Nationwide. If it has been some time since you purchased your coverage, take the time to familiarize yourself with your policy’s coverage and claims procedures.

Details to explore include possible waiting periods, coinsurance requirements and civil authority limitations, explains Hubert Klein, partner and practice manager of the Financial Advisory Services Group in Iselin, NJ, of EisnerAmper LLP. . He offers the real-life example of a business owner who expected to claim up to his $ 4 million limit of coverage for damage from Super Storm Sandy. But he forgot that his policy limited losses for each business location to a maximum of $ 300,000. The per location limit meant he received $ 2.2 million, barely half of his coverage limit.

Don’t skimp on the supposed extras

Considering the cost of commercial insurance, it’s tempting for homeowners to forgo some coverages, perhaps in an attempt to save money or because they feel it’s an unlikely risk, explains. Boggs of Independent Insurance Agents & Brokers of America. Experts advise to err on the side of coverage unless the cost becomes truly prohibitive.

A common mistake, says Boggs, is basing coverage on faulty assumptions. As an example, he cites a customer who opted out of theft coverage because he believed his employees would not steal him. But one did, and the losses were not covered by his policy.

In other cases, companies ignore the addition of so-called policy endorsements, to deal with specific risks that could be catastrophic. As an example, Boggs cites a manufacturer who relies heavily on a buyer or supplier, yet fails to add an approval that protects the manufacturer if that other company is unable to meet their requirements. “When the business has a specific need covered by a policy rider, not purchasing coverage for a few premium dollars can be very costly,” says Boggs.

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Don’t prioritize the cost of the premium over the level of coverage

It can be just as risky to purchase insurance based on what you want to pay and then adjust the policy to that number, regardless of the financial risks that may remain uncovered.

To avoid this mistake, Klein advises, start by doing a risk analysis that takes into account your potential exposure and what your needs might be. “People who are looking for premiums often sacrifice tens of thousands of dollars in possible coverage recovery for minimum premiums,” Klein explains. He cites the example of a business owner who tries to reduce his premium by about $ 1,000, without giving enough thought to the extent of the compromise in insurance coverage.

For his part, Boggs says he used to tell clients, “I can always are you getting a lower price, but wouldn’t you want to have the right coverage when something bad happens? “”.

Anticipate and widely

Smart insurance planning for a business must go beyond policing on behalf of the business and beyond current needs, says Richard Whitworth, head of business advisory at Cetera Financial Group Inc., a California network. investment advisory firms. Entrepreneurs should also think holistically about how their personal and work insurance needs intersect, he says, and make sure key personnel have adequate life insurance, among other needs.

Nor should they delay coverage of insurance needs deemed premature, such as coverage that will help minimize disruption in the event of a sudden death, disability, or departure of a homeowner.

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About Nereida Nystrom

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