Mitigating risk in your business

We have an insurance renewal coming up. We know prices are going up in general. On top of that we’ve had a couple of claims, which we’re sure will hurt us. We need help and we’re looking for recommendations.

Thoughts of the day: Know what kinds of risk you want protection from. Lower risk by making constructive changes to how you conduct business. Decide how much risk you’re willing to shoulder.

Since different types of agents and brokers sell different types of insurance, it’s important to put together a team who can provide advice on risk exposure, risk-reduction programs and insurance options.

In case your building gets damaged, are you insuring the building or just the contents? What if people get hurt on your property? Automobiles and drivers encounter road hazards coming and going to and from work and while running errands for the business — does your coverage protect them?

Worried about getting sued? You might want a policy that covers out-of-court settlements as well as attorney expenses, litigation and court judgments. What about an employee who damages property or harms another person? What if someone claims you gave them bad advice? Think about copyright violations and other marketing or production errors.

Health insurance, workers compensation, state disability, Social Security disability and unemployment insurance protect workers in case of injury and lack of work. Some you pay for and some the employee pays for. Knowing which kicks in when is crucial.

Life insurance protects those who are left behind — including the business — when someone dies. It provides liquidity, something most survivors and businesses need in times of distress. Life insurance can be used to buy time as you search for solutions. It takes care of people and functions within the business. It can be used to bring shares back to the company.

Bonds help secure performance and compliance. Bonds can protect you from another firm’s default or insure that you will perform as promised. Fidelity bonds protect in the case of employee theft.

If you want to share risk, expect to treat your insurance companies, agents and insurance brokers like business partners. Educate them about your business. Be honest and forthright about problems and concerns. Work with them throughout the year. If shopping for insurance, ask peers for referrals and check references.

It’s human nature to avoid problems. But the less you know about a subject, the greater your risk. That’s especially true when it comes to insurance.

How well can you protect your business? From cybercrime? How about burst water pipes? Employee accidents? What if you lost your office or warehouse? What if employees couldn’t come to work?

Lower insurance costs by writing out a risk mitigation plan. Identify and eliminate root causes. Train employees, vendors and customers how to avoid and respond to problems. Look to state agencies for assistance on training. Set goals for injury-free days. Measure days without claims. Be proactive.

Keep in mind that entrepreneurs are inherently risk takers. They assume bad things will happen to the other guy. And they’re sure they’ll be able to work through problems that happen to them. But why put an otherwise healthy business in jeopardy? Insurance is another cost of doing business. Get an understanding of the costs and benefits. Sell your customers on the fact that insurance means your business is a safe, well-run solution that will continue to be here for them.

Try “Business Insurance Basics: An Entrepreneur’s Guide to Buying, Understanding, and Managing Insurance” by Scott Walton.


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