The year-end means more than merriment, mistletoe, and your year-end business income and financial reconciliation – it’s also the time to perform your annual business insurance review.
As your business has grown or shifted in the past year, likely so have your insurance needs. Small business owners and enterprise organizations alike should make annual insurance review a routine so you always have adequate coverage and aren’t paying any more than you absolutely have to.
In this article, we break down all the different policies you should be reviewing, how you should assess your business needs, and provide you with a business insurance policy review checklist.
Insurance Policies to Review
Your business is likely holding several different insurance policies, and it’s important to review them all. It may also be that as you’ve grown you will need to invest in some new ones, as well, depending on the type of business and what has changed in the past year. To give you a sense of the common types of insurance products for businesses, we pulled this helpful list of commercial insurance policies from insurance company Nationwide:
- Business Liability Coverage Insurance can help protect you, your employees, and customers in the case of an accident.
- Commercial Property Insurance can help protect your company’s physical assets, such as your building, furniture, equipment, and inventory. You can get commercial property coverage even if you work from home.
- Business Owners’ Policy, or BOP, is a combined package of different coverages, such as property, liability, crime coverage, and more. A BOP can help you get a customized policy tailored to your specific needs.
- Commercial Auto Insurance can protect your business and employees from a variety of damages and accidents related to the operation of vehicles.
- Crime Insurance can protect your business from crime-related losses such as theft and forgery.
- Business Income Insurance can help pay bills and cover costs if your business has to close temporarily.
- Commercial Umbrella Insurance can provide your business with extra protection beyond your standard liability policy.
- Cyber Liability Insurance can help protect your business from damages related to electronic data, computer systems, data breaches, and even computer attacks.
- Equipment Breakdown Insurance can protect your business from damages and costs related to computers, electrical and mechanical equipment breakdowns.
- Business Interruption Insurance can pay for lost income and help keep your business afloat if external forces cause you to close for a short time.
- Workers’ Compensation Insurance can protect your employees in the instance of a work-related accident.
- Accounts Receivable Insurance can cover your business against losses caused by the inability to collect customer payments.
How to Assess Your Business Insurance Coverage Needs
Before taking you to our checklist, there are a few major considerations you should weigh to make sure you’re getting enough coverage for the year. Once you’ve assessed your own needs, you can start a constructive dialogue with your insurance agent to make sure you’re only taking on as much insurance as you actually need.
1. How many claims did your company make?
It’s time to audit the number of claims and the amount of each claim as a guideline for coverage you might need in the new year. It may be helpful to look at the past few years of claims, as well, to look for trends. If employees aren’t typically getting close to your current deductible, you may want to look at reducing your deductible rather than expanding.
2. How many new assets has the company added?
Additional or changed offices, office remodels, property damage, new company vehicles, etc. are all additions that might require you to increase your coverage. Conversely, sold off assets could mean you need less coverage. Determine if your risk has increased or decreased as a result of your physical assets and update your coverage to reflect this.
3. How many new employees were onboarded in the previous year?
Your employees are your greatest asset, and a growing workforce might require you to assess if your professional liability insurance or workers’ compensation needs a bump.
4. Consider your deductibles
Your deductibles are a major consideration when planning for your insurance in the upcoming year. It may seem odd, but sometimes increasing your deductibles can actually decrease your overall premium.
When assessing your claims for the year, it’s also important to determine if the average amount on a claim was drastically lower than your deductible, in which case it may make sense to reduce it.
Annual Business Insurance Review Checklist
We recommend you run through this yes or no checklist annually to make sure you’re covering all your bases when reviewing your business insurance. It covers both administrative considerations, such as the name and structure of your business, as well as your coverage needs.
- Has your business name changed?
- Has your business incorporation structure changed? (sole proprietorship vs. LLC vs. C-Corp)
- Have the ownership, partners, or officers of your business changed?
- Has your branding, unique offering, services, or products changed or expanded?
- Has your business expanded into new locations, cities, States, or countries?
- Has the physical or mailing address of your business changed?
Do you own the building your company operates out of? If so:
- Have you reassessed in the past year the value of your office and its physical assets?
- Are you managing your risk through security systems, fire suppression, surveillance equipment, etc?
If you rent or lease:
- Has your purchase, rent, or lease agreement changed in the past year
- Have you reassessed in the past year the value of your physical assets and business personal property?
- Has your company payroll increased?
- Has your company sales increased?
- Have you entered into new, lucrative customer contracts?
- Have you added or removed automobiles from your operations?
- Has the usage of company vehicles changed?
- Do you or your employees use personal vehicles for work?
- Has it been more than 12 months since you reviewed your auto insurance limits of liability and deductibles?
- Has there been a major increase or decrease in company payroll?
- Do you have employees who are remote workers full or part-time?
- Do you employ subcontractors or third-party agencies that work onsite?
- Do you or your employees regularly travel within or outside of the US for work?
Unsure about how to negotiate your new insurance policies?
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