Welcome to the Program Insurance Group blog! Do you ever have an insurance question or wonder what you’re even paying for, but don’t want to spend hours searching the internet? We want to make insurance understandable, be your source for education, and explain common coverages. Check back often so you don’t miss our latest insurance insights!
As an entrepreneur, there are many daily things that occupy your time, efforts, and thoughts…having the right insurance can at least put your mind at ease and allow you to sleep better at night knowing you, and your assets are properly protected. Entrepreneurs put a lot on the line, especially when making the jump to go out on their own, starting their own business. Having the proper insurance in place can alleviate some of the risks associated with owning your own business.
It’s important for entrepreneurs to do their part to help make business insurance work properly for them. Below are a couple of points to consider regarding your insurance coverage.
1. Understand the Basics
At the minimum, an entrepreneur should know what coverages are in place and what they cover? Knowing the basics of some or all the following coverages can be invaluable to your piece of mind.
What is General Liability – protects business owners against claims of liability for bodily injury, property damage, and personal and advertising injury from business operations.
What is Workers Compensation – provides wage replacements and medical benefits to employees injured while performing work responsibilities.
What is Commercial Auto – provides coverage for bodily injury or property damage arising out of the ownership, maintenance or use of autos by a business and its employees.
What is Liquor Liability – for business that serve, sell, distribute, manufacture alcohol; protects business owners from bodily injury and property damage caused by an intoxicated person.
What is Employer Practices Liability (EPLI) – covering wrongful acts arising from the employment process; including wrongful termination, discrimination, sexual harassment, inappropriate workplace conduct, and retaliation.
Deductible vs Premium – Deductible is the amount you pay if/when a claim arises. Premium is the yearly cost of the insurance.
2. Not Insuring Correctly
You’ve probably heard the adage before from a business owner. Maybe you’ve even said it yourself—that you are far more insured than you need to be. In most cases, that’s a false belief.
People often think that they’re paying too much or that they’re over-insured. But, when you look into the numbers, you should see that it’s about 1 to 2% of your gross sales, typically. That amount isn’t going to break your business. If you go out of business, it’s never going to be because you bought too much insurance. But, not having enough insurance—or having the wrong insurance—very well could break your business.
Think about your auto insurance, for example. Often, people buy the minimum amount of coverage, thinking that a potential accident will never happen to them. But, accidents happen every day.
Entrepreneurs think liability claims will never happen to them, but they do happen to somebody. Things do go wrong. People slip or get robbed. Building roofs collapse. Employees get into bad car wrecks and people, unfortunately, do get killed. When bad things happen, you need to be prepared for them, and that’s when insurance is a critical thing. Nobody wants to talk to the insurance agent until bad things happen. But, by then, it’s too late. That’s why it’s so important to make sure you have the best plan, because you truly never know.
3. Insuring Items That Aren’t Critical or Even Important to Your Business
Insurance is meant to help in the event of a loss. But, that doesn’t mean everything you own has to be covered.
Businesses sometimes have lots of assets and they insure against inconsequential loss, you may not have to have a policy for small things you might lose, or a box of office supplies an employee might steal. But, major things that could break your business are important to cover. Look at the deductible amount to save costs there. You want to insure yourself from catastrophic loss, not inconsequential loss. We can’t insure every small thing, but you can and should protect ourselves from a major loss.
4. Setting Limits that are Too Low
It’s critical to set the right coverage limits for your particular business—and no two businesses are the same.
Owners buy a commercial automobile policy and they have minimum limits of coverage. They may think that model should apply to all insurance. But, your car is the biggest liability most people have. We text, talk on the phone, listen to the radio, and, in a split second, can cause or be the victim of a multi-million-dollar loss. Not having enough insurance coverage, in terms of limits, on that automobile can become a devastating decision for someone.
The key question is: how much insurance is enough? There is a litmus test that can help make the decision easier.
Make insurance more attractive than you personally. Add up all of your balances and purchase insurance limits based on that. We want the plaintiff to say: ‘I want to leave you alone—take your insurance and go on.’ When your balance sheet on limits is too low, that’s when you can get into trouble. At the end of the day, they should go after the insurance coverage, not go after you and your business.Top of Form
5. Not Using an Independent Agent
An independent insurance agent has the ability to create customized solutions. When you’re using a bigger, national or even regional insurance agency, you can get pigeonholed into types of coverage you don’t need without the luxury of understanding what options are really out there for you. That doesn’t mean those companies are bad, many of them have specialties themselves. Independent agents have the flexibility to match your business needs to the right carrier that specializes in a business like yours that will also provide great service for if/when a loss occurs.