As a small business owner you wear many hats. You may represent the entire marketing, production and finance pisions of your organization. Often less glamorous tasks are left on the back burner until you get a "round-to-it". One of these critical but often ignored tasks is the financial protection of your business.
The need for business insurance is perhaps more important for a small company than a large one. Small businesses are frequently capitalized with the hard earned savings of the owners. New businesses frequently do not earn a profit in their first five years. A large capital reserve is not sitting awaiting future opportunities. Additional capital may not be available to buy replacements if a loss was to occur.
Imagining the uncomfortable consequences of attempting to explain an uninsured loss to a partner, investor or spouse should be motivation enough for all of us to find one of those "round-to-its". Consider the investment of an hour of your time to obtain the financial protection your business requires as time well spent. The objective of your business insurance program should be to enable your business to continue, without financial stress, through interruption of operations as a result of an accident. The development of your insurance program should consist of three phases:
1. Risk Management
Risk Management is the identification and minimization of the potential causes of loss to your business. There are four basic steps to reduce the chance your business will suffer a setback from a loss.
Step 1 - Assess Exposures
As the owner you are in the best position to know the loss potential of your business. Essentially, you are asking yourself what could go wrong? Best of all it costs you nothing to do! Several questions you should ask are:
- How hard would it be to obtain replacements?
- How long would it take? What would it cost?
- What would the result of those delays be?
- Would your clients still be there or would they find your competitors in the interim?
- What would you do for income?
- How attractive is your stock to thieves? How secure are your premises?
- How much of a fire hazard do your commodities, premises or operations present?
- What are the liability hazards of your products or what could go wrong with your work?
- Does your lease impose specific responsibilities upon you? Have you met those requirements?
- What would the likely outcome be of any of the above?
Step 2 - Minimize Loss Potential
Once you have assessed the exposures you are in a better position to minimize them. Often simply taking the time to review how a potential loss could occur provides the solution of how to minimize it. Police, firefighters and insurers do a great job after the fact. Your role should be preventative.
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Develop an action plan for restoration in advance. It does not have to be an elaborate manual. Simple forethought will do. Where will you operate? How will you get critical equipment? Collect together important contacts, suppliers, telephone numbers and other data.
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Maintain off-site information backup. A relative or friend would be happy to keep a computer disk for you. Update it regularly! It will not do well to lose all your critical restoration information in case of a fire. Worse to realize the backup data on the disk you left with Uncle Joe is two years old.
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Reduce or eliminate fire hazards and install smoke detectors and fire extinguishers.
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Upgrade premises security - dead-bolt locks, window bars, lighting and alarm systems.
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Consult with your local police departments. Most have inpiduals assigned to assist with your loss prevention measures.
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Review your operations with your insurance broker. They have access to insurance company personnel trained to assess your exposures and provide suggestions.
Step 3 - Self Insure
Assume as much of the loss as you comfortably can. Insurance companies provide discounts for the use of larger deductibles. Choose as large a deductible your business can comfortably afford. Limiting the number of small claims you submit helps to keep your premiums low. Select only the degree of coverage you truly need.
Step 4 - Insurance
With the assistance of a knowledgeable broker, select the insurance products tailored to meet your needs. Purchase sufficient coverage to meet your insurance needs.
2. Choosing A Broker
The investment of an hour of your time with a knowledgeable insurance broker may prove to be the key to whether your business survives. Find a broker who has the interest and time to help you with a thorough review. A good place to start is here at Roberts-McClure Insurance. We will take the time to explain coverage choices and options to you.
We also represent a large number of insurance companies that write Commercial Insurance. We will assist you in obtaining good insurance value, not necessarily just the cheapest price. As with any other professional service, often there are reasons for price differences.
In addition, most insurance companies have a variety of payment financing options so you should be able to find one that suits your needs.
3. Coverage Selection
As your broker we will be able to recommend the type of coverage that affords you the degree of protection you require. The basic areas of protection are:
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Business Property - Stock, Equipment, Computers and other property. Remember to mention equipment you take with you to trade shows, client’s offices or places of business.
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Crime - Coverage for money loss and employee theft.
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Income - Business income and disability protection. Your business likely has expenses that would continue even in case of a loss. Also, you are likely relying on your business for personal income. Payments will need to continue on leased equipment. All of these factors point to a need for income protection. As well several options are available to assist independent small business owners with disability protection in the event they are unable to operate their business due to injury.
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Liability - Protection against bodily injury or property damage you may do to others in the course of your business. Even something as simple as having someone slip and fall at your premises can result in an expensive lawsuit. This coverage includes provision for payment of legal defence fees. Your homeowners or tenants policy does not cover your business operations, even at your home.
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Automobile - Ensure your vehicle is insured for commercial use.
Often we can offer a broad package of coverages to meet your needs at affordable premiums. Traditionally, insurance companies have ignored the Home Based Business (HBB) segment. Specific policy restrictions or exclusions are in place in most Homeowner’s Insurance or Tenant Insurance policies. Your personal homeowners policy does not insure business property or liability exposures. New HBB products are available tailored to meet the needs of the HBB segment.
So here is the plan to find one of those "round-to-its" you need to get your financial protection program in place.
First, make that telephone call to us right now! Make the appointment to discuss your business insurance needs. This will provide the incentive to do the balance of the preparation in advance of our meeting.
Next, take the time to answer the questions in the Risk Management section. You will be well prepared to discuss your business with your broker.
Finally, remember we are here to place insurance on your behalf - we work for you. Take the time to review the alternatives and make your coverage choice. It’s time well spent!