Keeping Insurance Costs Down

As mentioned in the discussion on workers' compensation, emphasizing safety to reduce accidents in the workplace is one means to reduce this cost. In addition, a solid safety program can save dollars, as well as grief. By promoting safety, you can help prevent injury to employees and clients and receive premium credits.

Another cost-saving option is loss retention, which means paying a higher deductible in exchange for premium savings. Owners must decide what dollar amount can be absorbed or retained for each risk or loss exposure. For example, you may decide to retain the first $1,000 of a loss and insure all losses over that amount.

Risk transfer is another option. This involves a contract where responsibility for loss is transferred to another party. For example, a company that leases business equipment could require the lessee to carry the insurance on the equipment being leased.

To protect your business, require a certificate of insurance from people with whom you do business. When you lease equipment or hire a contractor, ask for a document from their insurance agent that spells out their coverages.

Another means to save money is to join a group of business owners to purchase insurance together under one blanket policy, for example, through a trade association. Members pool their expenses and savings, which allows a more cost-effective arrangement than purchasing coverage as an individual business.

It pays to reevaluate your coverage and review it annually. If the business has grown or changed, make sure you are covered. For example, if you are doing twice the business you did three years ago, or have diversified into a new line of business, your current policy may be inadequate in the event of a loss.

Generally, sticking with one insurance company has value. The time to consider a change is when an insurer is not responsive to your needs, when claims service has been unsatisfactory or there are dramatic price increases that are not explained to your satisfaction. When requesting and reviewing bids from other insurance companies, be sure the coverages being quoted are comparable and the information upon which premiums are based is the same.

It's a good idea to choose an insurance company on more than just price. Consideration should be given to claims services, reputation, available coverages and financial strength, as well. Ask if the insurance company has a special program for insuring small businesses.

Independent insurance company rating agencies "grade" insurance companies based on their financial strength. Make sure your insurance company has an acceptable rating.

A good insurance agent or broker can help guide you and make sure you, your employees and your company are protected. Is your agent responsive? Do you get call backs within a reasonable time and are you contacted prior to renewal?

When looking for an agent, get references from other area business owners who operate businesses similar to your own. Ask for names of businesses the agent currently represents and ask permission to call a few of them. Look at an agent's professional credentials, such as the CPCU designation. Ask if the agency handles many small businesses and if they are actively pursuing businesses like yours.

Republished by permission of the St. Louis Small Business Monthly, The Source for Business Owners. July 2001