Insuring your business

Risk management is an important part of running and building a business. Getting the right insurance to protect your business against the unforseen and unthinkable should be a key part of any business plan.

For example, if you experienced a fire at your workplace, do you have a clear idea about how much it’s likely to cost? While there’s the obvious damage to your contents and the building, have you considered the damage from smoke, damage to employee belongings or leased equipment? You’re also likely to face a drop in revenue while your business is getting back on its feet.

Types of insurance

Key types of insurance include:

·        employer’s liability

·        burglary

·        fire

·        business interruption

·        professional indemnity for a professional services business

·        product liability

·        business interruption or loss of profits

·        machinery breakdown

·        workers compensation

·        key person

·        personal accident or sickness.

Buying insurance

There are three ways to buy insurance:

1.      Go directly to insurance companies. If you’re going to arrange insurance yourself, make sure that you obtain at least three quotes and you’re comparing ‘apples with apples’. Make sure you carefully check what’s covered and what isn’t covered. Check the claims procedures and make sure you understand the replacement policy terms.

2.      Use an insurance agent. An agent acts on behalf of an insurance company so keep in mind that the advice is not independent.

3.      Use an insurance broker. A broker is independent of any insurance companies and their role is to shop around till they find the best policies to suit your business. They will work with you to evaluate the risks in your business and they should have a good understanding of how each policy fits your business’s needs. Brokers can be slightly more expensive than going directly to an insurance company, but the difference is minimal. Given the volume of policies they deal with, they can normally negotiate competitive rates.

Plus, going through a broker can help you avoid one of the most common traps for small business owners – being underinsured. It’s essential that all your assets are insured for full replacement value. Don’t insure them for what you think they’re worth, insure them for the amount you’d have to pay if you had to replace them at today’s prices.

Tips for buying insurance

·        Make monthly payments: In order to reduce the stress on your cash flow, consider paying your premiums each month via direct debit.

·        Tighten up your security: Improve the security of your premises in order to reduce your premiums.

·        Insure your home office: Don’t forget to insure the contents of your office if you work from home.