As the new year approaches, we often look back at the year gone by, reflect on the coming year, and make resolutions for the future. Business owners should do the same. But this means more than setting revenue goals.
An important part of this review process should involve insurance coverage. The flipping of the calendar page is a good time to consider current coverage and determine if any changes are warranted to improve the protection of your business in the coming year. A thorough policy review covers three aspects: new exposures, business changes, and outdated coverage.
A company can change a lot in one year. Look over the last 12 months and consider any new exposures you may have added. Did you purchase new equipment or vehicles? Have you started manufacturing or selling new products? Changes in locations can also generate new exposures in the areas of liability and property damage.
Make sure your current insurance policies encompass any of these changes you have made. If you find any gaps, now is the perfect time to close them.
Beyond basic changes that could have added new exposure, consider any new needs your company may have as it grows. You may need to put policies in place that were not necessary in the past. For example, increased reliance on equipment operations may make equipment breakdown insurance necessary. If you’re storing large amounts of customer data, you may need protection against cybercrime. Increased property coverage may also be needed if you have expanded to multiple locations or increased your assets. Taking on employees may create the need for workers’ compensation coverage and employee theft coverage.
Avoid leaving your company exposed. As you grow, ensure you have the right policies and coverage limits in place to protect your operations.
Adding coverage isn’t the only possible result of your annual insurance review. Consider what current coverage may be outdated. Did you reduce inventory? Have you sold any equipment? Make sure you aren’t carrying any policies you no longer need. It may also make sense to reduce some coverage. For example, vehicles that have been around more than a decade may no longer require comprehensive coverage. You may also want to switch coverage on equipment to actual cash value. Another possible adjustment could be the amount of your deductibles.
It’s a good idea to review the value of your assets and compare these to your current financial situation. This will help you determine how much coverage you truly need.
Worth the Investment
Insurance Journal reports that 40 percent of small businesses will file a claim this decade. The most common claim for these enterprises is burglary and theft, which covers an average loss of $8,000. Other claims, such as customer injury, product liability, and reputational harm, average between $30,000 and $50,000.
For a small fraction of your overhead, insurance premiums can cover these potentially crippling costs. It’s well worth the investment of time and finances to review your coverage and put appropriate policies in place.
Contact my office to review your current coverage and ensure you have the right policies to protect your company in 2020.