Making Money While You’re Saving Money
As an entrepreneur, you need to secure adequate business insurance coverage for your company so you are safeguarded in the event of a loss or claim. It takes blood, sweat, and tears to run a successful business. It is imperative that you protect everything that you have worked hard for. But did you realize that you could be hemorrhaging money through your business insurance premiums?
Business insurance covers a wide range of potential incidents and, while it’s important to shield yourself from the inherent litigious dangers that come with owning a company, you shouldn’t be paying an astronomical amount for your coverage.
Fortunately, you can rest easy knowing that there are always ways to work the system. Cutting expenditures can be fairly simple, you just have to get crafty with your money saving techniques. These 5 ways to save money on your business insurance have proven to be the most effective. Stop the bleeding! And check out these creative ways to cut costs on your premiums.
Increase Your Deductible
Your insurance deductible is your out of pocket cost in the event of a claim. For example, if your deductible is $500, and you file a claim for $1200, you will pay the first $500 and your carrier will swoop in and cover the remaining $700 cost. The lower the deductible, the less you pay out of pocket.
So how would one save money by increasing their deductible? Great question.
When you increase your deductible, your insurance carrier will lower your premium. Why? Because raising that deductible lowers your risk factor. The higher the deductible you have, the less your provider will have to pay out for a claim. On average, businesses can save 5%-10% by increasing their deductible amount. However, it is up to you to decide how much risk you are willing to take and how high you want your deductible to be.
For companies with an impressive cash-flow who can afford to pay those higher deductible costs, this option can yield significant savings. You may not even have to file claims for smaller incidents because you can afford to pay for the upfront costs yourself. This strategy saves even more money for your business over time. Every year that you go without filing a claim, the extra money you save from having the higher deductible plan will be pocketed.
However, it is important to note that not all businesses will benefit from increasing their deductible. If you do not have a sufficient cash-flow and are worried about covering any unexpected costs, it is definitely worth having a lower deductible that you can afford. You can always adjust your deductible down the line once you are comfortable paying a higher deductible amount if an incident were to occur.
*Pro tip! If your business can afford it, stash away the funds that you save from increasing your deductible. That way, you’ll be able to use that cash to pay for damages when or if they occur.
Revise Projected Payroll and Sales
The size of your company will have a substantial impact on how much you pay for your business insurance. In fact, as your business continues to expand, the amount that you pay in insurance will grow proportionately. The reason for this is that with elevated revenues and a higher number of employees, the chance of a claim occurring is much higher, so more income and a larger workforce is directly correlated with the level of risk a company poses to their insurance provider. More money, more problems, am I right?
It is difficult to mitigate the business insurance costs associated with payroll and sales. It’s not like you’re going to fire half of your workforce and slash your annual revenue just to lower your premium. What we do recommend is revisiting your payroll and sales forecasts – if sales are down or payroll is down, adjust those projections! It is a sure way to save your company some money.
If your business utilizes company vehicles, or if you employ workers who do a lot of driving on the job, implementing a telematics program is an incredibly productive way to save on business insurance costs.
Telematics is also known as usage-based insurance (UBI) and it uses driving habits along with a score to determine the amount that your business will pay for auto insurance. How does it work? A small device is installed into your employee’s car and it monitors the driving data- speed, braking, acceleration, what time of day they’re driving, etc. When your employee takes a peek at their data, they will gain insights into their driving habits. This will (hopefully) impact their behavior to drive safer. Studies have shown that telematics insurance programs have had a tremendously positive impact; they have lowered the rate of car crashes involving young drivers by a whopping 20% and 56% of drivers reported making changes to their driving habits after having telematics devices installed in their cars.
The additional bonus? A safe driver will cost your business much less to insure than it would a reckless driver. And, many insurance carriers offer discounts if businesses choose to implement the telematics program, like Fleet Safety 360 offered by State Auto Insurance.
Review Commercial Auto Schedule
Commercial auto insurance protects against theft, damage, and third-party liability for vehicles you own. It would be wise to keep track of your vehicle inventory on your business insurance policy. If you sell or get rid of a commercial vehicle or trailer, make sure to remove it from your policy so that you aren’t paying for coverage that you do not need.
Additionally, your commercial auto insurance rates are not only determined by the type of vehicles on your auto schedule, but the drivers of those vehicles. As a business owner, you want to make sure you are checking the driving record of any new drivers you are adding to your auto policy. A few speeding tickets or accidents can make a driver very expensive to insure and can increase your risk of filing a claim. If you lose or terminate an employee listed as a scheduled driver, make sure to let your insurance agent know to update your policy.
Review Schedule of Additional Insureds
Having an Additional Insured (AI) means that you have added someone else onto your business insurance policy. By doing so, that AI is getting two valuable types of protection:
- Bodily Injury and Property Damage Liability – If property damage occurs, or somebody’s medical bills need to be paid for, your company’s policy may pay those expenses on behalf of your AI, if the loss has to do with your business operations.
- Defense – If someone sues your AI for an incident that is covered by your company’s insurance, your AI would be covered under your business insurance policy. These situations are generally outlined in a contractual agreement between you and the additional insured and the lawsuit would have to arise from your business’s activities directly. After all – you can’t be held liable for your AI’s actions if it has nothing to do with your business operations!
Additional Insureds tend to be more prevalent in general liability policies. Adding an Additional Insured party to your business insurance policy is generally a requirement found in contractual agreements, or a pre-requisite for a client you would like to do business with. Costs vary among policy types and carriers. Some business insurance providers offer a flat rate to cover anyone that you contractually agree to include as an AI, while others charge for each.
Make sure you take a peek at your business insurance policy’s schedule of additional insureds and remove those clients that you are no longer doing business with.
Your business insurance needs may change over time and that’s okay! Making appropriate adjustments to your business insurance policy as your enterprise expands and contracts is a sure and clever way to save your company from that financial hemorrhage we mentioned earlier. Remember – the goal here is to save money while also securing guaranteed, A+ commercial protection, and that is a goal that we at Camargo can help you reach.