Commercial insurance is a cost that is an inevitable part of running a small business. Many business owners look at it as a type of tax that is just part of being in business. Many of these same business owners think negotiating for a lower premium is not worth their time because the coverages are all very similar. This could not be farther from the truth.
There are several things related to your commercial insurance policies that can drastically affect what your business pays for premium. Here are 5 factors that can help your business save when purchasing commercial insurance.
Know the difference between General and Professional Liability
General Liability Insurance is the most basic type of liability coverage any business can secure to protect their business. It is required by law for most businesses in most states throughout the country. Even if it is not legally required for your business to secure coverage it is a very wise decision to purchase the basic coverage if you value your business.
General Liability Coverage protects your business from damages and bodily injury claims to third parties who interact with your business. If you own a restaurant, this can be someone slipping and falling inside your business after you mop the floors. The one thing to remember about a general liability policy is that it is not an all-encompassing policy. It does not cover everything and there are exclusions.
Many of those exclusions need to be covered by a professional liability policy. This type of coverage is also commonly referred to as errors and omissions or medical malpractice. Professional liability covers people and businesses who offer professional advice and services. This applies to doctors, lawyers, engineers, surveyors or anyone who offers professional advice or provides a specialized service.
Know if your business is required to obtain workers compensation coverage or not
The workers’ compensation system is dealt with by the state governments’. Each state has different rules about which business do and do not need to secure workers’ compensation coverage. Some have minimum thresholds requiring a certain amount of revenue before you are required to carry coverage. Other states have a minimum number of employees you are required to have before you are required to secure coverage for your business.
Some states have exceptions for certain types of businesses like small family farms or if your business employees travelling performers. It’s crucial for you to check with the state governing board for your state to determine if you are required to purchase coverage.
Make sure your business is classified correctly for workers’ compensation
There is an organization called the National Council on Compensation Insurance (NCCI). NCCI is the main governing body for 35 out of the 50 states. Even the states that do not use this organization officially, go by the similar guidelines to those adopted by NCCI to determine rates on premium for workers’ compensation insurance. This is the main function of NCCI: To determine the baseline for premium on workers’ compensation insurance coverage.
It is extremely important to make sure your agent and carrier have your business listed in the proper code for your industry. Several industries have more than one classification code based on the scope of the work your business does. If you are placed in a more risk adverse code than what your business actually operates you can pay hundreds if not thousands of dollars too much in premium.
Those mistakes usually get corrected during the end of term audit, but even if you receive a refund it means that you have had valuable dollars tied up in premium payments unnecessarily. That is cash flow that could have gone towards other more important business needs.
In the event your business is placed in a less dangerous classification code it can force your business to come up with additional payments for the premium you did not pay throughout the term.
Make sure you have the right type of commercial auto insurance
You do not have to own and operate cars to need some type of commercial auto insurance for your business. If you have employees who use their personal cars for business duties or employees who use a rental car during business travel than you need to protect your business with hired and non-owned auto coverage. This is a common misconception about car insurance that can cost a business immensely when an accident happens.
Many business owners think that the employees personal auto policy will cover any accidents that may occur with their car, but if they are using the car for business purposes than the liability is on the business. When an accident happens and there is a claim the employees personal auto carrier can forward the liability to the business or the businesses insurance carrier. If the business does not have coverage in place than they can be liable for the repair of the vehicles and any medical costs to both the employee and the other involved third parties depending upon whose fault the accident was.
Speaking with your insurance professional about how and when employees use a vehicle as a part of your business operations can help you secure adequate protection for your businesses auto liability needs.
Determine if you need cyber liability and data breach coverage
Cyber security insurance comes in two forms that are usually sold in a package. Cyber liability deals with your businesses liability to other third parties. These third parties could be customers, vendors or anyone who is damaged as a result of a data breach at your company.
Data Breach coverage is to protect the damage done to you and your business first hand. This can be things like hiring a Public Relations firm to repair your businesses damaged image.