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4 Tips For Managing Your Small Business Insurance Costs

Updated: October 2019

Managing business insurance costs is one of the many responsibilities you are likely juggling if you own a small business. It's a good idea to periodically review your business insurance policy to make sure you have the right amount of protection for your company and are getting the most for your money. While keeping your bank account in mind, here are some factors to consider as you make decisions about your business insurance policy:

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1. Reduce Costs By Bundling Insurance Coverages

Some business owners may have multiple policies with different insurance companies. For example, a business might purchase general liability coverage from one insurer and data compromise coverage from another. By bundling all your business coverages into one policy, you may be able to reduce your total premium costs — the amount you pay an insurer to keep the policy in force. As an added bonus, having only one business insurance policy can make managing your insurance renewals a little less time-consuming.

2. Re-evaluate Your Deductibles

A deductible is the amount of money you pay out of pocket toward a covered claim. Increasing the deductible on your business insurance policy may reduce the cost of your premium. You could then consider putting the money you saved back into your business each month. However, before choosing a higher deductible, consider how much money you'd have available to pay out of pocket to repair your business or replace its contents after a covered claim, like theft or a fire, recommends the Insurance Information Institute (III).

3. Meet With Your Insurance Agent Annually To Review Coverages

Business needs can change rapidly. It's a good idea to review your policy with your insurance agent on a regular basis to help ensure you have the appropriate coverage for your business. You may find that you can adjust some existing coverages or that you need to purchase additional protection. It's also important to note that having insufficient policy limits may result in a penalty. This is a fine you'd need to pay for not purchasing enough insurance.

The III says you should let your insurance agent know when you make significant changes at your business, such as:

  • Reducing or increasing the number of employees you have (for example, decreasing from 20 to 10 employees)
  • Moving your business to a new location
  • Introducing operational changes (such as purchasing new equipment or expanding product offerings)
When reviewing your business's insurance policy, it's also important to understand the different coverages that may be available. These may include:
  • General liability insurance: May help protect your company in the event of a lawsuit if you or an employee accidentally hurt someone or damage their belongings while doing your work.
  • Business property coverage: Helps protect your business's building and its contents and may help replace business property (such as office furniture or computers) after a covered loss.
  • Business interruption insurance: May help replace lost income and pay for extra expenses if your business is affected by a covered peril.
  • Business auto insurance: If you have company vehicles, this coverage helps repair or replace them in the event of an accident.
  • Equipment breakdown coverage: This coverage helps pay to repair or replace damaged or broken-down equipment after a covered event.
  • Employment practices liability insurance: Helps pay for legal costs if your business is sued by an employee or contractor.
  • Errors and omissions insurance (also known as miscellaneous professional liability insurance): This coverage helps protect small business owners if a client holds them responsible for losses based on mistakes or false advice supplied by the business.
  • Data compromise coverage: Helps reimburse your business for certain expenses, such as credit monitoring services or legal fees, after a data breach.
Your insurance agent can help you review your current coverages and make any adjustments based on your company's changing needs.

4. Consider Stronger Risk Management In Your Daily Operations

Identifying potential business risks and having the right insurance coverage in place can be financially significant if the unexpected happens. For example, say your company experiences a data breach and you do not have data compromise coverage. This means you'd be responsible for costs related to your business's recovery, such as credit monitoring services or any legal fees you may incur (as well as potential fines from your state if your business was required to have this coverage). Depending on the situation, this could mean thousands of dollars out of your pocket — whereas if you had data compromise coverage, your insurer would have helped pay for some of these expenses.

You should also consider taking some measures at your company to help reduce business risks. These are some resources you may find helpful:

  • Planning for a disaster at your business: It's a good idea to think ahead and have a plan in place to help your business recover after a disaster, such as a destructive storm. Doing so may help your business keep it's doors open, or reopen sooner, after a disaster strikes.
  • Business succession planning: As a business owner, you will likely want to leave your company in good hands when you decide to retire. Having a succession plan in place may help the transition go more smoothly.
Reviewing and understanding your small business insurance policy is an important component of owning a business. If you have questions about your business insurance policy or would like to review your coverages, it's a good idea to connect with your insurance agent. They can help you ensure you're spending money on coverages that are appropriate for your business needs.

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This content is for informational purposes only and may not be applicable to all situations.

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