9 Ways to minimize business insurance costs without cutting corners
Every small business needs comprehensive insurance coverage to protect against liabilities, including on-the-job injuries, customer accidents and unexpected damage. Failing to insure your business can result in costly lawsuits, lengthy litigation or hefty government fines.
The collection of policies you need to cover your business, including general liability insurance, workers' compensation, property insurance and professional liability insurance, can add up to a significant annual investment. Working in a high-risk industry drives up costs even more. However, these policies are essential if you want to operate your business legally and prevent serious consequences should an incident occur.
What can you do to reduce costs without cutting corners, risking the future of your company and compromising the safety of both employees and customers? Maintain integrity and save money with these nine smart ways to lower insurance costs.
Reassess Your Insurance Needs Annually
Take time every year to look over your insurance policy for items no longer requiring coverage. These may include properties you sold, vehicles no longer in operation and employees who left the company. Make sure that coverage for equipment is based on depreciated values rather than full market values and ensure that your building insurance is in line with the property’s actual worth. Also, if your business grew or shrank considerably in the previous year, you should call your insurance company to discuss adjusting your coverage to reflect changes so that you’re not paying for coverage you don’t need.
Review Employee Classifications
Workers' compensation class codes tell insurance companies the type of work performed by each employee in your business Improper classification could lead to higher insurance premiums if your employees are erroneously listed as being in high-risk jobs. Deliberate misclassification of workers in an attempt to save money is unethical, leaves employees without essential coverage and can incur serious penalties. Reviewing employee classifications when you review your insurance policies can alert you to potentially expensive mistakes in need of correction.
Choose No-Lapse Coverage
If your business goes into a slump or experiences a predictable slow season at a particular time during the year, it may be tempting to drop your insurance coverage to avoid paying premiums when cash flow is low. This practice can come back to haunt you by giving you a reputation for being inconsistent and making insurance companies wary of extending coverage to your business when sales pick up again. Keeping your coverage keeps you connected with a reliable source for insurance and gives you the continued assurance of always being protected in case of an unforeseen event. Even during slow times, your business isn’t immune to accidents, incidents and damage from adverse weather, so look for other places to reduce costs if premiums are putting a strain on your budget.
Whether you run an established business or are just starting out, you can benefit from comparing rates offered by different insurance companies. Be sure to look at similar or identical coverage to get a realistic idea of how much you can save by choosing one provider over another and call for clarification on any terms or restrictions you don’t understand.
Look for a Comprehensive Package
Don’t make the mistake of thinking a general liability or business owner's policy provides enough insurance coverage. To protect against any eventuality, you need more than one or two common policies. Talk with your insurance company about the possibility of combining all essential business coverage into one package to save on premiums, or look at the bundles offered by other companies to discover if you’d be better off switching providers.
Make Safety a Priority
Avoid potential rate hikes for workers' compensation insurance by training and educating employees regarding proper safety practices in the workplace. You can put together your own training or bring in a third party to conduct a program or seminar. Research new procedures and technologies as they become available and make a plan to implement those with the greatest benefits for your business. Be consistent with training and review your safety policies often so that adjustments and updates can be made as needed.
The security of your business location and any sensitive customer information you handle is just as important as physical safety. Assess your current security system to determine if there are any unprotected areas in need of better coverage and do a risk assessment to uncover potential loopholes in digital security. Change or upgrade each system accordingly to minimize the risk of a breach as much as possible.
Rethink Your Payment Plan
How much does business insurance cost if you opt to pay annual premiums all at once instead of on a payment plan? Discuss the possibility of switching to a yearly payment with your agent to find out how much you can save by dropping the fee charged for the apparent privilege of paying monthly. If savings are significant, adjust your business budget to ensure you can afford the lump sum each year.
Pay Attention to Workplace Health
What you pay for workers' compensation and health insurance is based on the health and well-being of your employees. Many companies have instituted workplace wellness initiatives, and these programs not only reduce the risk of illness and chronic disease among staff members but also lower the risk associated with providing coverage. Consider offering wellness classes, starting a corporate fitness club or running wellness challenges with appropriate incentives to encourage employees to adopt healthier behaviors.