Commercial Insurance – A Guide to Lowering Your Cost and Understanding Coverages

Having commercial insurance protecting your business is critical and knowing the different types of coverages available is essential to lowering your cost. Professional liability coverage (aka Errors and Omissions insurance) is a form of insurance that protects businesses that offer advice and services to others. A common form of errors and omissions that gets a lot of attention on TV and the news is medical malpractice. This type of professional liability insurance policy is designed to protect doctors and other medical professionals if harm should come to someone who takes their professional advice and suffers as a result.

Another important form of protection is called business interruption insurance. If you have ever been through a hurricane or an earthquake then you know that it’s not just the catastrophe you need to worry about, but sometimes what happens after. To help you solve the problems that can arise when you are trying to rebuild your business by helping to replace the lost income and paying your normal expenses is what business interruption insurance is designed to do. Some policies may cover extra expenses you can have when trying to get your company back on its feet, but be sure to check your policy for the exact details.

The most frequent coverage needed by small businesses is commercial vehicle insurance. Most personal insurance policies will not cover accidents that happen to vehicles that are being driven while conducting services for the company and are the reason small businesses must get commercial auto insurance to protect their assets. If you don’t have commercial coverage and your company vehicle is involved in an accident you will not be covered. Commercial auto insurance has a range of options, just like personal auto insurance. The first step in getting commercial auto insurance at an affordable rate is to decide what policy options you will need.

While automobile insurance is often unavoidable and necessary, business owners are concerned with the rising cost that they are forced to pay. Many small businesses live in fear when it comes time to shop for their insurance that they will be taken advantage of. Trying to find the best price for your commercial insurance needs is not as difficult as people might think. Prices vary greatly from company to company, so to get the best deal possible, you should shop around. A great first step is shopping online and getting a list of brokers and companies that specialize in commercial business insurance.

Also consider raising your deductible on your policy as this will have a major impact on the price of your policy. The deductible is the amount of money you must pay before the insurance will start paying claims. The higher deductible you have the less you will have to pay in premiums each month. You should also ask you agent about multiple car discounts if you need to cover several vehicles.

While commercial insurance is often unavoidable, knowing the different types of coverages that are available on the market to help protect against loses is a big first step in not only protecting your company, but also lowering the cost of your coverage. By shopping online and following a few important tips you can be sure that you will receive the best possible rates on your next policy.

Cheap Commercial Insurance Can Be Costly

Saving money by obtaining cheap commercial insurance for your business may actually end up, in the long run, costing your business money. Unfortunately, many business owners do not think of insurance as one of their most basic operational expenses such as inventory, shipping and payroll. Rather, they think of it as something that is necessary, and, of course, some of it such as commercial liability insurance is required by statute, but to most beginning business people, just a basic bottom-rung general commercial insurance package is all they will budget for.

We can all understand this line of thinking as our today’s business economic environment demands that every business examine every category of its expenses, and one of the major expenses to any business is commercial insurance. While it is understandable to think about saving money by purchasing low cost or cheap commercial insurance, it probably is not the prudent choice to make.

The first thing you must consider, as a business owner or would-be business owner, is how much coverage do you actually need to protect all your assets against possible claims? While you can sometimes buy commercial insurance that will meet the coverages required by law for less money, will those coverages actually protect you adequately should some unforeseen event occur. For example, your commercial liability pays claims up to one million dollars, but you are liable for a million and a half.

Your business would have to cover the difference between what your liability policy covered and what was actually awarded by the court. Would you have this additional five hundred thousand, or would it ruin your business?

Admittedly, getting commercial insurance quotes can be a daunting task, but considerations that will help you avoid falling into the trap of buying cheap commercial insurance just for the sake of saving money are:

1. Remember that insurance companies like all other businesses are in business first and foremost to make money. While the commercial insurance agents representing these companies portray themselves as individuals concerned only with your welfare, they have to make a living just like anyone else, and sometimes they will sell you a policy that does not really afford you the coverage you actually need.

2. Sit down and take the time to add up all your assets. How much commercial insurance do you need to replace those assets if something unexpected were to happen? Also, consider how much you would need to pay your expenses if your business operations were interrupted for a period of time. For example, lets say your building partially burned, how would you pay your expenses until you were fully operational again?

3. Interview several different licensed insurance brokers, and carefully compare coverages and rates. Remember, that different commercial insurers describe their various coverages differently. If you don’t understand the confusing and sometimes tricky lingo, ask the brokers what it means.

While the whole idea of pouring over insurance terminology and all the various available commercial coverages can make you want to bang your head on your desk, as a responsible business person, it is, in the end, up to you to educate yourself regarding commercial insurance.

The Role of the Commercial Insurance Broker

Business come in all sizes, and the role of the Commercial Insurance Broker will vary in some respects with the size of the client company and the amount of insurance expertise it has available among its own staff.

The approach to commercial insurance of a small engineering workshop in a side-street will not be the same as that of a huge multi-national corporation which may number an insurance company among its subsidiaries. The essentials of the broker’s task will be the same, however, for the largest company as it is for the individual: to use his knowledge of insurance and of the insurance market to help his client to arrange a sound insurance programme which, to the maximum extent possible, meets the client’s particular needs.

The Business Insurance Broker will handle the insurances of a small company in a manner very similar to those of an individual. The relationship is likely to be a personal one wit the directors of the business, and they can be considered, in a way, as individuals who have a different, and more extended, set of insurance needs because of their involvement with the company.

The first essential will be for the insurance broker to ensure that his clients have the compulsory commercial insurances which they need for their business to be carried on legally.

Employer’s liability cover to protect the workforce must be arranged, and motor insurance is also likely to be a necessity. If the business has plant or machinery which must have a periodical statutory inspection, it will be usual to arrange for this to be done by a specialist engineering insurer under the terms of an engineering inspection contract, with or without insurance.

Fire insurance will be very important, as will consequential loss insurance to protect the firm against loss of earnings during the period following a fire until it is fully back in business. Then there will be all the other insurances which a business needs – public and products liability, theft and money insurance, goods in transit and perhaps marine insurance, all-risks covers, fidelity guarantee and possibly others. The broker may also be asked to provide insurance covers for staff, a group life and pensions scheme, or personal accident or permanent health insurance for example.

The range of insurance which may be needed, and the variety of problems which may be associated with them, place great demands on the broker with an industrial firm as his client, and make it much less possible for him to be a specialist in one or two types of insurance only. The individual may be happy to consult a broker for life or motor insurance only, but the industrial company is likely to want a single source of advice for all its insurance problems.

The larger the client company is, the less it will be interested in buying standardised commercial insurance covers or packages designed for small business insurance, and the more it will want policies which match its own specific needs. This calls for a very deep understanding of the client’s business on the part of the broker, matched by creativity in designing insurance solutions to the problems posed. The Commercial Insurance Broker’s negotiating skills may also be called upon to persuade an insurer to accept what may be an entirely new approach to a particular insurance need.

The problems of a small spread of risk may be overcome because the company is large enough to be rated on its own past record rather than as a member of a trade which is rated as a class in an SME business insurance package. When it reaches this size, a company may be interested in extensive self-insurance, and these days it is part of the broker’s role to help such clients develop appropriate self-insurance plans and to advise on risk management measures to ensure that the risk that is being retained is reduced as far as is economically possible.