Understanding Your Business Insurance Needs
If you're evaluating all the costs that go into running your business, you may be tempted to save with minimum business insurance. This can be risky because the wrong insurance may leave you taking full financial responsibility in an emergency. Instead, it's better to evaluate your business needs and work with a commercial insurance broker to get the right policy.
Start by considering a few key factors about your company and operation:
- What are the risks inherent in your industry? Certain fields such as healthcare and finance may have more risks for liabilities than other business sectors.
- How big is your business? Your business insurance needs will change if you have more employees, properties and vehicles to protect.
- Where does your company operate? Different cities, states and countries can have different insurance requirements for commercial businesses.
Once you've looked at your needs, sit down with your leadership team and discuss what you are currently doing to manage your risks. Risk management strategies can vary; some businesses may try to avoid all potential issues with a strict risk avoidance method while others may simply accept risks or aim to minimize them.
Risk transfer is a strategy that shifts the impact of problems to a third party, often an insurance company. Understanding where you fall on this spectrum allows you to come up with questions to ask commercial insurance broker partners so you get exactly what you need.
Top Questions to Ask a Commercial Insurance Broker
With your business needs in mind, here are five things you'll want to touch on.
1. What Is Covered and What Are the Limits?
Some of the first questions to ask a commercial insurance broker are inquiries about what your policy will cover. You don't want to purchase a policy and find a critical gap in coverage that your plan can't help with or the payout limits are too low to be useful. Ask specifically:
- Property damage: Is damage from fire, theft, vandalism and natural disasters covered?
- Liability: How much will the policy pay for bodily injuries related to the business, damage to property belonging to others and legal defense costs?
- Business interruptions: Will the policy provide coverage if the business has to stop operating and begins to lose income? Can that cover employee wages and other critical costs?
- Workers' compensation: What are the requirements and payouts for workers hurt while working for your company?
Make sure you understand the maximum payouts available per claim and for the overall policy. The limits need to be high enough to account for your company's size and needs.
2. What Are the Policy Details and Exclusions?
On the flip side, you also need to ask your commercial insurance broker what types of things are excluded from your policy. Reading a policy on your own can be tough because of lots of jargon and technical terms that are hard to understand. Having a conversation with the broker is the best chance of understanding business insurance exclusions.
Common exclusions for commercial insurance policies include damage from flooding, damage from intentional acts and even liability for defective products. Some insurance companies may not offer any protection in these categories while others may require an additional rider or policy to give you coverage. Ask about these details early in the research process.
3. How Does the Claims Process Work?
An insurance policy doesn't mean much if you can't make a claim when you need to so check into the claims process. Here are questions to ask a commercial insurance broker about making claims:
- How to report a claim: Who is authorized to file a claim? How do you contact the insurance company (by phone, email, app or other)? What documentation is needed?
- Timeline: How long does it typically take to process and settle a claim?
- Your responsibilities: Are there any specific actions the policyholder needs to take during the process?
- Dispute resolution: What can be done if you disagree with a claim decision?
Getting your claims paid quickly and efficiently is essential to keeping your business running when things go wrong.
4. How Much Are Premiums and Other Costs?
Once you know an insurance policy can provide the right coverage with exclusions you can manage and a claims process that works for your needs, you'll want to look into costs. A policy you can't afford to maintain won't do you much good in the long run.
Your commercial insurance broker should offer explanations of your premium costs, deductibles and any fees. This should cover any additional policies you may be adding, such as flood coverage. A quality broker will also explain how different coverage levels affect your costs and can show you how to adjust policies to fit your budget.
5. What Is Your Level of Expertise as a Commercial Insurance Broker?
There are also questions to ask a commercial insurance broker about their own experience. How long have they worked in commercial insurance? Are they well-versed in providing insurance options in your industry? Do they understand the regulations and risks for your location? You'll want to work with a knowledgeable broker who can prevent problems.
Other Considerations
Aside from these key areas, you should look into your broker's compensation setup. Many get commissions, so you want to ensure the broker prioritizes your needs, not their commission pay. Also, compare each policy you are considering buying line-by-line to see which is the better fit.
Protect Your Business With the Right Commercial Insurance Broker
A good commercial insurance broker can become a long-term partner who protects your company as you grow and expand, so don't be afraid to ask tough questions to find the right fit.
Sources:
https://www.sba.gov/business-guide/launch-your-business/get-business-insurance
https://www.linkedin.com/pulse/44-questions-you-can-use-interview-your-insurance-broker-daryl-henry/
https://familybusinessassociation.org/article/6-key-questions-to-ask-your-business-insurance-broker