Finding the right insurance coverage for your small business needs without spending too much on premiums is a delicate balance of following regulations, weighing risks and researching the industry.
You can save yourself a lot of hassle and frustration by consulting key professionals, such as lawyers and accountants, as well as understanding what your risks and liabilities are.
Consult professionals.
One of the first pieces of advice you are likely to get from entrepreneurs on your startup is to consult a lawyer and an accountant in the first few stages. When it comes to getting the right insurance coverage, these professionals can help you determine what the regulations are for your industry and what the risks are. Firms offering auditing services can help you determine how much of your budget should be spent on insurance as well as what the impact on company finances is likely to be for incidents not covered by your policies.
For instance, if you own the property where your business resides and a customer is injured slipping on a wet floor, then you can be liable for their medical expenses and pay this amount from your working capital if not properly insured.
Look into captures.
Some industries have specific risks which are more expensive to have covered by traditional insurance companies or are difficult to find coverage for. Group captures are the answer to this problem because they are an insurance company wholly owned by the entities it insures, allowing businesses more customization options for policies.
These captures can generate dividends for the member companies and hold to IFRS standards for tax purposes.
Understand types of liability.
Depending on the type of company you own, you may have to have several different types of liability insurance. General liability is the minimum usually required by governing bodies for all types of business, but professionals such as lawyers, accountants and contractors may need a professional liability policy as well.
Business liability insurance can help protect your personal assets if the company is sued and employment practices liability policies can protect the company against lawsuits relating to sexual harassment, discrimination or other wrongful employment practices. The more you understand about the types of liability your company may face, the more comprehensive your coverage can be.
Reduce risks.
Once you know what your coverage needs to include, and what risks your company faces, you can take steps to lower your premiums by minimizing your risk. Many insurance companies and captures will offer incentives for you to reduce risks by installing emergency stations for employees, placing non-slip mats in front of doors or even offering safety training courses. Another way you can reduce risks is by having robust policies with firm repercussions for violations. Make sure that both the policies and the employee’s understanding of them are in writing and kept on file to help any legal cases stemming from covered items.
For instance, if it is your written policy that sexual harassment of coworkers or customers results in termination of employment, and you later fire someone for this type of offense, then you can use the documents in a lawsuit to prove that the company is not liable for damages from either party.
This reduces the chances of an insurance company paying for damages covered by your employment practices liability policy as well as the amount your company is likely to need from the pooled assets, lowering your contribution to that pool.
Consider package policies.
Since your company is likely to need several different types of insurance policies, it is a good idea to look for packages that meet your coverage needs. Some insurance companies will have pre-built packages designed to cover startups in your industry and others will offer customizable packages based on your needs. These bundles will usually save you a percentage on your monthly premiums and allow you to pay one bill instead of three or four.
Payment and renewal options.
Renewing your policies annually and paying for that year upfront are other ways to reduce your premiums while still getting the coverage you need. This allows you to review your risks and coverage each year and remove or reduce policies as your needs change. Some insurers will offer payment plans designed to give you the reduced price of paying for a year or six months at a time but spread that amount over several months. Report any changes in risk mitigation efforts to your insurer as soon as they happen and take the time to review and implement any incentives or advice offered by the company for further savings.
Finding the right insurance coverage for your business can mean the difference between financial ruin and quick recovery after an accident or lawsuit. To help make the process easier, you can consult professionals such as accountants and attorneys, consider package deals to cover your risks and understand the things you can be held liable for.
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