Eric Cervantes Business Insurance Page
7 Talking points a business owner must consider to better protect their business
In my time in insurance I have come across few business owners who are happy about their insurance expenses. Who wants to budget for an intangible product that you may never use? This is a common theme I come across daily and usually get three different perspectives.
Perspective 1: I have been in business 20 years and never had a loss! I don't know why I even need insurance?
I cringe when I hear this. Yes, you obviously have good risk controls in place otherwise you probably would have already experienced a loss BUT most underwriters I talk to say that just means you are "due". Usually if you have been loss free for that long then your insurance premiums should be minimal in comparison anyway.
Perspective 2: I hate insurance companies because I filed a claim and my policy did not cover my loss!
Every insurance company is going to have subtle differences within their policy and most policies are set up to include a particular coverage for something in one part of the policy but then exclude the same coverage in a different part of the policy. This is confusing, that is why it is so important to review your policy with your agent so you are informed about the exclusions and there are no surprises.
Perspective 3: My insurance policy saved my business.
It is said that agents make their money when a claim occurs but I tend to believe the opposite. A good agent will make sure that your business insurance has the coverage YOU need for your particular business so there are not coverage gaps. This will increase the likelihood that when something happens your business is protected. This insured views the agent as a resource and not a bill collector.
No matter what your perspective, I have come up with seven talking points every business owner must consider in order to better protect their company:
- 1. Tell your agent what it is that keeps you up at night.
Don't ever assume your agent knows everything about your business. The better agents will gather as much information as possible but it always helps if your agent knows where your concerns are so they can protect them.
Ex. I rely on my servers for my business. My servers are at a different location and if a fire shuts them down do I have coverage for income I will lose/expenses I will incur? How much money would your business lose if there were no production for 2 weeks/month/6 months? Your agent can help protect circumstances like this and other.
- 2. Full disclosure.
Know that any information you do not disclose can create gaps in coverage.
Ex. If you keep all your information stored electronically but you agent is not aware you could end up spending thousands of dollars recouping that information if it is lost due to a covered peril when you could have added that coverage to your policy.
- 3. Interview your agent.
I understand price is important in our current financial atmosphere but when it comes to protecting your livelihood it is worth dealing with someone who can make appropriate recommendations and not just get you a cheap price. Hopefully you can find one that can do both!!
Ex. Insured pays 25% less for a policy to insure their building. After closer review the policy had an 80% co-insurance and was underinsured. Once the penalty was applied for underinsuring (yes, companies will do this) the business owner would receive $130,000 for a $1,600,000 building in case of a total loss. This was a real life scenario.
- 4. Ask questions.
Two positives come out of this. First, you will be informed and feel comfortable with your policy. Second, it will create an open dialogue, which could result in different insurance strategies for your business.
Ex. I have a high turn over, will my insurance rates go up if my employees are constantly changing? Knowing this information an agent can recommend Employment Practice Liability Insurance in order to add coverage for a wrongful termination claim.
- 5. If it takes more than a day to get response from your agent, fire him/her!!
More often then not I hear this comment "I can never get a hold of my agent". Whooooop!!! That is music to my ears because that is the easiest thing an agent can do. Our standard operating procedure is same day response, ask your agent what their standard operating procedures are and hold him/her to it. If they put their cell phone on their card they usually mean business.
- 6. Make sure your agent goes over the policy with you.
You need to know what is protected and what is not protected. From time to time when I go through this step with my clients we find coverage endorsements to add/remove. You always want to catch these before you have a claim.
- 7. Lastly, I recommend you work with an independent agent.
I will be the first to tell you this is an extremely bias opinion coming from me. I am an independent agent. Here is why I say this though. If you work with a captive agent (farmer, state farm, ect.) they will only be able to provide one policy form at one price, a lot of time the coverage forms will not cater to your needs. An independent agent will have a multitude of companies he/she is contracted with in order to provide the best coverage and most affordable price in the market place.
Bonus note: Ask your agent about additional insured and waiver of subrogation. Transfer of risk is vital for companies who deal with other business operations, make sure you are not on the wrong end!
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