If you own or operate a small business you know how costly commercial insurance can be. If you stay in business long enough you will more than likely experience a claim that shows you how valuable insurance can be when a disaster strikes your business. In many cases, having the proper insurance in place can be the difference between being closed for a few days or weeks and being closed permanently.
6 Ways to Save on Commercial Insurance
Here are 6 simple strategies small business owners can use to save their business significant amounts of money when quoting coverage for their business.
1) Partner with an independent insurance agent.
The first step to save money on commercial insurance is determining who to partner with for purchasing the necessary coverage. Independent insurance agents are a great route to go because they have the ability to shop your policy around to many carriers in order to get you better coverage at rock bottom rates.
If you partner with an agency who only partners with one carrier or a select few carriers then you are never sure your premium is competitive. It is equally important to take some extra time to explain everything your employees do and do not partake in on a daily basis. This information can help your agent place you in the proper classification code, recommend appropriate coverage for the risks you face and possibly recommend what coverages you can do without.
Insurance agents service many different people from many different walks of life. They do this on a daily basis and not all of those customer’s value price as their top determining factor when choosing insurance. If price is at the top of your priority list then communicate this to your agent. Some carriers offer credits for certain industries they have a stronger appetite for. Some states have credits depending upon several different aspects of your business. Mentioning this as a priority to your insurance agent early in the process is important to getting the best price.
3) Selectively price shop.
Shopping your policy around every few years is a very good idea. If for nothing else then you have the confidence to know that your agent and your carrier are offering you a competitive policy.
Switching carriers every year for the slightest dip in price on premium is not advisable. This is because when and if you ever have a claim, the carrier is much more likely to work with you if you are a repeat customer. If you have been with a carrier for several years, your agent can negotiate on your behalf when it is time to renew so the carrier does not raise your rate or drop you from coverage altogether.
Once dropped from coverage most states require you to purchase coverage from the state provider which is more expensive and once you are in the state provider you are required to stay in the state fund for a period of 2-4 years depending upon your state. This can cost hundreds if not thousands in additional premium when you have a claim compared to a marginal amount you may save by switching carriers each year.
4) Consider Choosing a Pay As You Go Option
Alternative payment options like direct billing or pay as you go are great options for seasonal or cash-strapped businesses. The Pay as You Go Option is usually offered for workers’ compensation and for general liability coverage. This option can help businesses get coverage in place for much less up front cost than a traditional insurance policy.
In most cases a small business can get coverage in place for a few hundred dollars as opposed to around 30 percent of the estimated premium for the entire year. If you work in a business where it is difficult to anticipate what payroll will be for the entire year then this can be a great option. It also can help seasonal businesses get coverage in place at a lower cost and then pay the premium each month as the cash flow comes rolling in during the busier portion of the year.
5) Develop a well-documented safety program
Developing a well-documented safety program is crucial for the long term success of any business. This goes for if you run a bar or tavern that has a lot of face to face contact with the general public, you operate in a blue collar sector like construction or even if your business operates in an office setting like a law practice. The safety and well-being of your employees should always be a business priority.
Without healthy and happy employee’s, it will be difficult to meet the businesses goals. An effective safety program can also help your business save when it comes to purchasing insurance coverage. First and foremost, a safety program will help with productivity because employees will be working at full capacity a majority of the time.
A safety program can also prevent your premium from increasing when you do have a claim. This is because your agent can negotiate on your behalf that the claim is not a sign you run a business that does not value safety. Your agent can show the documentation to your carrier in an attempt to show them you are taking the proper precautions to prevent claims in the future.
The program will also help the injuries to be less severe which can keep the cost of an insurance claim down. The severity of claims can have negative effects on your experience modification rating. This is one of the main factors carriers use to determine how much to charge your business for coverage.
6) Include a return-to-work program in your safety plan.
A return-to-work program can drastically help your business because it will help get injured employees back to work quicker and limit the severity of an insurance claim. The quicker you can get an injured employee back to work, even in a limited capacity, the more likely they are to return to full time employment. This program will help allow you to show the injured employee and the other employees around them, that your business cares about the health and well-being of the employees.
Accidents happen, even to the safest companies, but how you react to an injury speaks volumes about the management of a business. How you treat an injured employee speaks volumes about management not only to the injured employee, but also to the other employees who are paying close attention to how you treat the injured coworker. This is an opportunity for you to take an unfortunate occurrence and turn it into an asset for your business by gaining the loyalty of your coworkers. You can only gain this loyalty by doing what is right for the injured employee.
Walt Capell started General Liability Shop.com in 2005. General Liability Shop.com is a rapidly growing national insurance agency with a strong reputation for forward-thinking, out-of-the-box products and solutions for business owners. Walt would like to use his experience as a small business owner and insurance expert to benefit the next generation of leaders.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.