Bank Adviser Monthly Articles
September 2016
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Insurance You Shouldn�t Skimp On
Don�t cut corners when it comes to insuring your small business

Carrying sufficient insurance coverage for your business can save you big money in the long run, but some entrepreneurs are still tempted to focus on the short-term costs and go with the cheapest option, often forgoing entire categories of insurance completely.  

Considering the risks involved with your business can help you determine whether you have enough coverage, or uncover areas where you need to shore up. 

�Get the right coverage, not necessarily the cheapest,� states Inaki Berenguer, CEO and co-founder of the digital insurance management platform CoverWallet in an interview with Business News Daily staff writer Adam C. Uzialko. �There�s always the chance that a business could get lucky, but the chances of something bad happening are much higher than that, and when it does, you�ll be happy you had the right coverage in place.� 

If you need to save money in your business budget, you should look anywhere but at your insurance bill. Cutting costs in other areas of your business might lead to lost opportunities or frustrations, but it is hard to think of a situation where the financial impact could be as large as the one you risk if you don�t have the type or level of insurance you end up needing. 

�Even when cash may be scarce, or revenues down, small businesses should not neglect their insurance needs,� states journalist and author Marc Davis for Investopedia. 

If you cut your budget for new equipment, for example, you may encounter a temporarily stressful situation if you have to run out and replace a malfunctioning printer in the middle of the day, and skimping on stocking inventory could mean lost profits if you run out of a popular item. Those issues are tiny compared to the financial price you could pay without the right level of insurance, however.  

�Businesses that are underinsured or without broad, proper and adequate coverage are taking needless risks, which could [result] in serious financial problems, including bankruptcy,� warns Davis. �In a crisis, a business without insurance or [that] is underinsured can be totally destroyed.� 

You can start protecting your business with a broad-spectrum business owner�s insurance policy (BOP), which packages together several types of coverage. This can give you a lower overall cost than you would pay if you added up the separate premiums of each included coverage type.  

�Typically, BOPs consist of property, general liability, vehicles, business interruption and other types of coverage common to most types of businesses,� states the U.S. Small Business Administration. �Not every type of insurance is included in a BOP.� 

After you carefully read the contents of your BOP, you can work with your provider to determine the other types of insurance you may need. In many cases, BOPs won�t cover water damage from outside your building or under the foundation, for example, which can occur if a water main breaks, a sewer backs up or there is a flood.  

You should also investigate coverage to protect your business if there is a terrorism event. 

�Even if you have terrorism coverage, it may provide protection only for property damage,� states Barbara Weltman, a guest blogger for the SBA. �You usually need a separate business interruption policy to protect you for lost profits resulting from acts of terrorism and the aftermath.� 

Depending on where your business is located, look into peril-specific policies to complement an all-risk policy. While an all-risk policy will include events that many small businesses may encounter, peril-specific policies are often used by businesses operating in areas with specific risk factors that are higher than the national average. These can cover losses from events like fire, flooding and crime.  

The best way to feel at ease knowing you have enough insurance for your small business is to talk with your provider. Plan on reading through your current policy and talking to your provider soon.


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