Setting up your own small business? A good move is to ensure that you have an eye on your expenditure right from the outset. That ensures you have enough cash left for critical expenses, mainly client building, marketing. But what about crucial costs like insurance?? You cannot ignore those at all. After all, insurance helps you protect your small firm against risks, right?
You are right, insurance is a crucial expense that should never be overlooked. But you can keep those costs under control too. The key is to ensure that the right risks are still covered with your plan. Here are some tips you can use to keep insurance costs under control for your brand new firm:
The first and most effective way to ensure you do not pay more than necessary for insurance is to do your comparison shopping. Invest time and effort in getting quotes from different reputed insurers and compare them side by side. Check the coverage details, see if they all insure you for the same things. If there are some unnecessary coverages, ask the insurer if they can eliminate that and cut the cost. Just doing this can help you find a sound insurance plan from a reliable insurer that is cost-effective.
Keep in mind that the insurer’s reputation is of paramount importance. You should NOT go for an unknown insurer just because they offer a cheap plan.
The right amount:
List out the risks that your business faces and then get a plan that covers those risks. Avoid insurance that promises to cover an exhaustive list of risks that you do not currently face. Remember that you can simply expand your coverage later or buy a new plan when you do face those risks. Right now, you would be paying a lot extra for a plan like that without any return from it. Figure out a reasonable value for the risks you face and get coverage to protect you from those risks alone.
For example, if you live in a location that has not seen a typhoon in a century, why should you pay for a policy that covers it? A whittled down insurance may cost you less.
You may be able to get a great price if you bundle up different insurance policies for your firm into one single policy from the same insurer. This also makes paying premiums and managing the policy easier for you. Ask your insurer if he offers a better price for bundled plans. In general, insurers do give discounts on such plans so that their clients will take out more coverage from them.
However, a very important point to note here is that these bundled plans may not include certain insurance types. One of the most necessary and critical insurance covers you need, Professional liability insurance, is often not included in such plans. (Read more about this and why you need it later in this post). If the bundled plan does not cover this, then you need a separate plan for this risk.
Claims free discounts:
Many insurers offer a discount for those business owners who have not filed any claim in the year. This is a bid to offer these business owners incentives because they are the best kind of risk for the insurer. Remember that the ideal situation for the insurer is to NOT have to pay claims. You can use this no claims bonus or discount to your advantage to cut costs for your small business. Check with the insurer if they have such a policy. If they do, then every year that you do NOT file a claim, ensure that you get this discount/ bonus.
This is one reason why you should not file small claims when your business can comfortably absorb the cost.
Seek payments methods that save costs:
Some insurers give you a discounted premium rate if you club all your premiums and pay upfront rather than through the year in installments. Check if yours has this feature too. While you are doing this, ensure that your business can absorb the yearly once lump sum payment. Also compare your loss of interest on the lump sum with the saving you get on your premiums and ensure you are still getting a good deal.
The insurance that you cannot do without
Professional liability insurance or errors and omissions insurance- this is the insurance that no small business can do without. The risk that this insurance for business covers arises from unhappy clients. If a client is unhappy with your service and sues you for:
- Negligent service
- Improper service
- Wrong advice
- Delayed service
Then this insurance kicks in and covers the costs you may incur in fighting your legal battle. With Professional Liability insurance covering you, your court costs, attorney fees and other costs are taken care of. Also, if you have to pay any damages, the plan may cover those too (up to specified limits). With such insurance covering you, you need not worry about the cost of court proceedings. Often, this fear keeps businesses from protecting their firm’s reputation when a client files a lawsuit. This insurance ensures that you can establish your innocence and protect your brand reputation in legal proceedings without your business taking a financial blow.
While cutting insurance costs is important, it is also important to ensure that you have the right kind of insurance protecting your business. That includes an effective professional liability plan!