The Business Insurance Balance
When it comes to risk assessment, every business should ensure that they consider and conduct it with the utmost care. Incorrectly assessing the risks that threaten your business could result in you accidentally leaving yourself exposed and vulnerable. Insurance is a vital tool for business owners to protect their assets and their livelihood against potential devastation.
As soon as any business owner hears the word ‘insurance’, the first thing they think of is the cost. Let’s not shy away from the fact that price is a major consideration factor when buying anything, and can influence whether you actually go through with the purchase or not. Insurance is no exception here.
Both having comprehensive cover and finding an affordable price are paramount for your business’s insurance – and they key is to find a balance between both.
Risks you Can’t Afford to Ignore
Even if you take out the most basic cover for your business – there are a few risks that you should make sure you take into consideration, as they could have the potential to wreak havoc and bring your business to its knees.
Financial risks can stem from anything that involves your money and cash flow – namely if money should stop coming into your business for some reason. There are a few different policies that can protect you from financial disruptions, for example, business interruption insurance. How would your business far if a major client or customer no longer required your products or services? Or if a fire spread from an adjoining building and forced you to close for repairs, would you still be able to pay your overheads?
With the internet become more and more a part of our culture – and our business structures – it has become necessary to protect against the threats that this brings. Insurance against these risks could range from antivirus protection, ensuring the security of data and sensitive information online, to covering connectivity problems.
Protection for the people involved with your company is essential for virtually every business. Whether it’s your staff or your customers, you should consider having insurance in place in case harm should come to any of them. As an example, if your business was blamed for causing injury to a member of the public, there’s a good chance you would not be able to afford a legal defence and/or compensation on your own. Policies you can consider taking out include public liability insurance, employers’ liability insurance and professional indemnity insurance.
Naturally occurring risks are just as big a threat to your business as any other, including fires, floods, storms, and land subsidence. The amount of damage that these events can cause is often overwhelming, and can cause no end of problems for your business. You should make sure that you have – at the very least – basic levels of cover against environmental risks. It may be worth checking whether the location in which your business remises is situated is particularly prone to any natural risks.
Before you start worrying that your business insurance is going to cost you a fortune, remember that when it comes to cost and insurance, the focus should always on value for money, rather than straight up cost. If you make sure that you’re getting what you need for the right price – however much that may be – then you can rest assured that your money isn’t going to waste.
How to Get the Most Bang for Your Insurance Buck
Balanced level of cover
Having a balanced level of cover means making sure that you’re not spending a lot of money on insurance that you may not benefit you all that much, but also making sure that you’re not so minimally covered that you’re still at risk. You should aim to take out middle-of-the-road coverage that will insurance you against the risks most pertinent to your business.
Or at least be as exact as you can be. For example, if you decide to take out contents insurance, don’t take an uneducated guess at the value of your stock, because it will only come to haunt you in the event of a claim. You may not be able to provide the exact figure, but take the time to get as close as you possibly can.
You should also make sure that your insurance policies are always up to date with any changes that you make in your business. If you have equipment insurance in place, and then invest in a lot of high-tech specialist equipment, chances are that revisions will have to be made to your policy in order to be properly covered.
Avoid Falling for Loopholes
Insurance policies are full of caveats and loopholes – don’t get caught out on a technicality. Make sure that you thoroughly read and understand every single element of each policy before you purchase it. You don’t want to mistakenly think you are covered against a certain risk, only to find out you’re not when you need it the most.
Compare and Haggle
With insurance, you very much get what you pay for, but that doesn’t necessarily mean that the first quote you are offered is the best one. It’s often well worth while going out of your way to do an online comparison, or calling another provider to see if they can beat your quote. You can also try haggling with a provider – sometimes you can convince them to give you certain discounts and reduction in exchange for your custom or loyalty.
Reduce Your Risk
Another good way of reducing the price of your business insurance premiums is to reduce the level of risk that you present to insurers. The less likely they feel they will have to pay out to you, the less they will change to insure you. You can reduce the level of risk your business presents by improving health and safety measures and procedures in your workplace, training staff, fitting locks on doors and windows, and investing in a good alarm system.
The Right Insurance for Your Business
All in all, business insurance can be tricky, but it’s important that you get it right. Take your time and analyse which risks your business is most at threat from. It can help to devise a ‘risk number scale’, whereby you assign two numbers between one and five to each different risk (5 being the lowest possible score, and 25 the highest). The first number is based on how likely the risk is to occur, and the second number is based on the level of damage it would do to your business if it did occur. When these numbers are multiplied together, you get the risk number.
Let’s consider an example. Say your business is located in an area that is prone to flooding. You may assign a number 4 for the likelihood of a flood occurring, as it would be quite likely. But, you may have extensive flood-protection measures already in place – due to being located in a commonly-flooding area. So, you may assign a 2 for the level of damage caused. Flooding would fall at 8 on the risk scale of 5 to 25.
Now, if the area your business is in does not have a particularly high crime rate – say it’s average – you may award a 3 for the likelihood of the occurrence of theft. But, if you have stock and equipment in your premises worth tens of thousands – a value your business could not afford to pay for replacements – then your level of damage number might be 5. This would mean that theft falls at 15 on the risk scale.
This might suggest that it may be more important to insure against theft than flooding.
Of course, this ‘risk scale’ is only meant as a guideline and should not be used as a definitive measure. It can help you to prioritise which policies you should take out – particularly if you are trying to keep costs down – but it’s up to you to know your business and the risks that could threaten it.
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