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Last week, Part 1 of this two-part series discussed the things you can do to help manage various insurance coverage expenses. That article can be found here. Part 2 discusses the different additional coverages that should be considered.
Consider these additional coverages
Business Income insurance will become an even wiser use of your insurance dollar in difficult times. If you are having trouble making ends meet when you are operating and generating a positive cash flow, imagine how difficult it would be to meet your ongoing financial obligation to yourself and others if you were to be out of business because of an insured loss.
With business income/extra expense coverage, the insurance company in the event of a loss to your property, would step into the shoes of the money machine and continue the income flow in accordance with the terms of your policy until you are able to rebuild or relocate in a reasonable period of time and return to the same level or income as you enjoyed before the loss.
Automobile Liability, General Liability and Workers’ Compensation will be the other coverages that you will want to monitor and keep in place but do so in the most cost effective method. The coverages for general liability and workers compensation may involve estimated exposures.
For example, the workers’ compensation premium is a percentage of your payroll. If you have downsized and will have lower payroll, you may want to check with your agent to determine the estimated payrolls that were used to calculate the premium and see if the insurance company can reduce the estimated premium accordingly.
Current trends in rates are about flat. If you reduce the exposures, the initial outlay may be less. Remember, however, these coverages are subject to audit so you ultimately pay for what you use. In other words, don’t underestimate your exposures as a cost saving mechanism because you will face an audit premium that will be due at about the same time as your renewal premiums; therefore further upsetting the balance of cash flows in and expense outflows.
The General Liability may be included with your property premium or it can be rated on the number of bays you have, the gross receipts you expect or other measures. Your agent will be able to tell you if there are estimates involved, they can be revised to reflect a more accurate picture of your exposures to loss much like the rates for workers compensation.
The bottom line on Automobile Liability, General Liability or Workers’ Compensation is that you should resist the temptation to cancel any of these coverages because you don’t have to buy them. When the economy is faltering, unfortunately, there is often times an increase in claims for damages and/or injuries that may be less than obvious. You as a business owner or operator may be faced with the costs of defending such allegations whether or not the claim is groundless.
Sleep on it
It has often been said, “The most important thing you buy when you purchase insurance is a good night’s sleep.” Do not complicate your business stability plans. When it is difficult to find the funds for routine maintenance and other issues; it is statistically factual that claims increase. Less insurance and less maintenance and routine repairs done when it is obvious they are needed add up to headaches for you, the business owner, injured consumers and the economy in general.
This is not the time to reduce your limits of protection from unknown financial exposures. General Liability and Automobile Liability reductions especially would not reduce your premiums significantly, even if you were to go to minimum limits which may be required by your state laws.
If anything, higher limits coupled with tough business choices regarding staffing, hours of operation, and similar business decisions will create an environment with better results and greater cash reserves that will enable you to continue operating now and be poised for the upturn that is expected in the near future.
Scott Brothers, CIC, is the president and CEO of Joplin, Missouri-based The Insurancenter. The Insurancenter has been insuring the car care industry since 1986 and is the leading writer of insurance for the industry nationwide. Scott can be contacted via email at firstname.lastname@example.org.