There are many different types of insurance policies available to small and medium-size business owners. There’s so much to consider, much of it being industry dependent, and also depending on what risks you, your employees, and customers undertake while doing business together.
Of course, if you’ve done any research to this point, you’re probably interested in seeing if you qualify for a comprehensive Business Owner’s Policy (BOP), which is great if you qualify and in fact need all that a BOP policy can cover. However, a BOP only scratches the surface of what most businesses need in terms of coverage.
So, how to get the best insurance coverage for your business, given the facts that your insurance agents may know something that you don’t know – and might use that knowledge to take advantage of you? Our friends at USA Business Insurance share some of the tips that most agents won’t tell you:
Insurance agents work for themselves, not necessarily you
It’s important to keep in mind that no two insurance providers offer the exact same coverage for the exact same price. Also, BOP only includes standard coverage for third-party liability, property, and business interruption. You still need to pay for separate coverage when it comes to auto and professional liability insurance, as well as worker’s compensation and disability insurance.
This can all get very convoluted and most definitely expensive – if you don’t understand what’s going on behind the scenes when an agent is trying to sell you on one policy or another.
Keep reading to learn 4 tips on how to protect yourself from insurance agents, while getting the best coverage possible for your business.
1. The agent you’re talking to may not be able to get you the best coverage
First, and most of you know this, but insurance agents will say whatever they have to in order to land your business. Most often, small business owners will be dealing with a local agent in the community they operate in.
This becomes a stark reality when it comes to the veil that can be created when selling you a comprehensive Business Owner’s Policy – so many costs and exclusions can be included that it’s hard for an inexperienced entrepreneur to understand everything contained within it.
Most brokers sell for a variety of companies, and will generally do their best to find policies that work best for your business, within the confines of the company or companies they sell for. However, whether they sell for multiple companies, or exclusively for the provider themselves (ie., State Farm, etc.), that agent’s options are still limited.
This is why business owners need to shop around – at least three independent brokers, or three separate sales reps from reputable longtime insurance providers.
2. Your business’s credit history is crucial to getting lower premiums
This can be of particular concern when getting liability, auto, and life insurance for your business, but healthcare and other related insurance policy rates can also be affected by a poor credit history. This reality trickles over into personal insurance, too – insurers want to mitigate their risks as much as possible. People/businesses that don’t pay their bills are obviously categorized as being risky.
When it comes to liability and auto insurance coverage, a poor credit score means (to insurance companies) that you’re more likely to miss payments, so the provider will jack up those rates to cover that possibility. Life insurance studies have shown people who pay their bills live longer, so it should be obvious they’re not going to give you or your employees killer rates if you have a bad score.
Private healthcare and dental coverage providers aren’t as likely to hold your entire credit history, such as bankruptcy, against you or your employees, as long as there’s a longish current history of timely bill payments.
3. Agents work on commission!
Shocking isn’t it! Most of us know this, but some agents can get wishy-washy when it comes to explaining how they’re compensated for doing their job. They might be honest, or flat out lie, depending on how much their reputation means to them.
Make no mistake. The person you’re talking to does indeed get paid a commission when they’re selling you business insurance. That compensation is directly related to how much your premiums cost. Read this Quora discussion to learn more about insurance agent commission rates and yearly salaries.
Guess what? That means that it’s actually in their best interest to oversell you on both the number and type of policies you need, and the amount of coverage they offer. In most cases, after you’ve signed and made one or two payments on the premiums, they get a big fat check and you’re none-the-wiser that you’re carrying more insurance coverage than you need.
4. Insurance claims adjusters are working indirectly for you
When it comes to many types of business insurance, you may be paying way too much in anticipation of a liability, auto, or worker’s compensation claim. What most agents won’t tell you is that claims adjusters immediately swing into action when a high cost claim is looming over their heads.
Say a customer makes a claim that your product caused them costly and/or irreparable harm and sues for $XXX,XXX – plus court costs, etc. Your insurance company’s claims adjuster will anticipate the possibility that costs will continue to rise and will work diligently to settle the claim (usually out of courts) before costs escalate.
This is the same for many other types of claims too. And, guess what? You’ve inadvertently helped your provider save thousands! While they did have to pay out, they paid far less than they could have, and managed to wrangle those higher rates out of you to boot.
Closing Thoughts
It’s prudent you consult with a non-biased business consultant before agreeing to pay any premiums in the hopes of reducing your own business risks – your situation might not be as complicated as the insurance agent makes it out to be.
All businesses, including home-based businesses, are responsible for ensuring they have adequate coverage to cover all potential circumstances that may arise. Fail to do so, and all it takes is one lawsuit – or act of God – to force you to close your doors – potentially leaving you to pay off lawsuit claimants and/or creditors long after you go out of business.
