How To Minimize Your Business Insurance Premiums

Small business owners know their business is a potential risk. Unlike major corporations or franchises, small companies operate at the whim of the marketplace. Any fluctuation, such as a natural disaster, supply chain disruption, or new product launch, can cause financial loss.

Business owners can cut financial risk by buying business insurance. Depending on the nature of your business, insurance coverage can protect you against property damage, theft, fire, and customer injury.

This article reviews ways to assess types of risk and lower your insurance premiums while maintaining essential coverage. Discuss other options with your insurance agent.

Purchasing Business Insurance

There are insurance packages for every type of business. Insurance for specific parts of your property, such as glass insurance, is possible. Property owners in areas with windstorms often have debris removal insurance to cover cleanup costs after bad storms.

Having insurance is only part of a good business risk management plan. Insurance premiums are expensive. Part of your plan should include assessing potential risks, eliminating them, or mitigating them. Your insurance company may use proof of risk management strategies to offer lower premiums.

Your business plan for buying insurance should be the same as any other business plan. Assess your risks and threats. Address the most common risks first. For example, ensuring your carpets are secure is easier than having your property surveyed for impending volcanic activity.

According to industry statistics, property and liability claims fall into three general categories:

• Burglary and theft
• Natural disasters (wind, water damage, fire)
• Customer slip-and-fall claims

With this in mind, you can sort your common hazards into categories and address them efficiently.

Burglary and Theft Prevention

There are several kinds of theft, sometimes classified as "larceny" by law enforcement. Depending on your type of business, any or all of these could be a problem.

• Burglary happens when someone breaks in after hours to steal items or commit another crime, such as arson.
• Robbery means taking items or money by force or threat of force.
• Shoplifting is taking items and leaving without paying.

Customers and employees can commit these crimes. They can be felonies or misdemeanors, depending on the property's value. Each state has a different cutoff for a "grand" or "petty" theft.

To reduce your theft liability, assess these areas of your company:

• Screen your employees before hiring. Honest employees are your best protection against external and internal theft.
• Invest in a security system. Retail and service businesses need more than good locks and a burglar alarm. Digital cameras on registers, entrances, and exits are inexpensive and should be part of your business operations. If your business is in a high-crime area, consider on-site security.
• Keep valuables off the main floor. Many thieves have been stunned to learn that jewelers keep their diamonds in a safe, and the cell phones on display are empty cases. If your business does cash transactions, sweep the till regularly.

Limiting Disaster Damage

Risk management doesn't stop with preventing human dangers. With foresight and planning, you can ease much of the harm caused by fire, flood, and even earthquakes. Some of these prevention plans can cost you in the short term but will pay off in reduced premiums and lower liability.

• Keep your building up to code. If you are a tenant, keep your suite or office maintained. If you find any code violations, bring them to the owner's attention immediately.
• Your security system may include a fire alarm. If not, be sure you have a system that alerts the fire department or 911 (a "ring-down" system).
• Some commercial buildings must have sprinkler systems. If yours is one, ensure your system is functional and meets the state and city codes.
• Know your local natural disaster protocols. Have contingency plans ready for hurricanes, tornadoes, earthquakes, or floods, as needed.

Reducing Customer Claims

Although the number-one cause of business loss is theft, the greatest fear is customer lawsuits. Business owners have liability insurance for fear of a customer slip-and-fall in the store or parking lot. You can easily avoid these injuries by taking reasonable precautions during your business day.

• If you have carpets, ensure they are firmly fixed to the floor. Repair rips or holes immediately. Rugs should not curl at the edges. Flooring should be slip-proof. You should have a procedure to remove any water or other slipping hazards.
• Customer areas should be well-lit and free of obstructions. Anywhere customers can't go should be securely locked during business hours.
• Product liability affects everyone in the commerce stream. Ensure you are current with product recalls and warnings.

Workers' Compensation

Your workers' compensation insurance is part of your business insurance. Workers' comp laws classify employees according to industry guidelines. If you misclassify your workers, you could pay higher premiums than necessary.

Workers' compensation protects employees who get injured in workplace accidents. Keeping your workers safe and healthy is the best way to keep your rates low.

• OSHA is your best resource for workplace safety. OSHA provides checklists and industry-specific guidelines for companies to self-analyze job-related hazards.
• Ensure you have personal protective equipment (PPE) for all employees as needed. If your business uses hazardous chemicals, ensure you have proper safety equipment.
• Have a safety training program with regular updates for all employees. Keep track of who attends and how employees use your program.
• Update your workers' compensation policy regularly as you hire and fire employees.

Other Ways to Reduce Your Premiums

As your business grows, your insurance needs change. Shopping for better interest rates should be part of your annual business review. There are other steps you can take as your business expands to keep your insurance costs down and coverage high.

• Ask for package deals. Bundles are not just for cable and internet. Insurance bundles for small business insurance can keep your total premiums lower than buying separate types of insurance.
• Cut unnecessary coverage. Did you buy a policy that you don't need any longer? Did you insure your property for actual value when replacement value is enough? Review your policy with your agent and see what needs adjusting.
• Raise your deductible or pay off your premium. Most business owners opt for higher premiums and lower deductibles. If you need an improved cash flow, take a lower premium with a higher deductible. Or, see if paying your annual premiums up front will knock a few percentage points off your rate.

Get Legal Advice

Before you pay for any insurance policy, talk it over with a business and commercial law attorney in your area. State and local laws may require specific coverage. Some businesses need unusual insurance, such as intellectual property or errors-and-omissions coverage. An attorney can help determine what policy would best suit your business needs.