Insurable business risks

An insurance policy covers the business (policyholder) for economic loss caused by a peril named in the policy. The business pays a known premium to have the insurer guarantee payment for the unknown loss. In this manner, the business transfers the economic risk to the insurance company.
Seeking the most appropriate insurance to cover your business is a heavy task. For the start-ups, it is often a last minute consideration and is bought after a panicky call to a broker or a call center, where the business-owner gets sold whatever they’ve been advised over the phone.
It is recommended to make a list of the top five things that would be catastrophic for your business. You want to get advice after deciding what sorts of events would have the biggest impact on the business. Then you must decide if you’d prefer to deal directly with an insurance company or go to a third party (bank, broker, etc.).  Your bank usually offers its own insurance policies or has a third party arrangement to underwrite their insurance. Good brokers deal with a variety of insurers, can advise on the best policies for your business and seek quotes on your behalf. While it is tempting to find ways to reduce premiums, do so with extreme caution. A business gets what it pays for, therefore you must consider the risks you are taking on when choosing an option that reduces premiums. As far as properties are concerned, the cost of insuring can be reduced if your business invests in fire prevention and security.
Indicative insurance policies to consider
Fire and defined events: Covers assets such as stocks, contents, fixtures and fittings against events such as fire, wind and water damage.
Machinery breakdown: Loss or damage to machinery as a result of breakdown.
Liability: Cover arising from your business activities to the general public.
Business interruption: Covers loss of profits after a fire or (listed) peril, burglary and money loss.
Management liability: To indemnify the insured against legal liability arising from or in connection with the management of the business.
Goods in transit: Should be considered if you constantly deliver goods to customers.
Burglary: Cover of theft due to forcible entry to your business.
Money: Loss of money in transit/safe/office.
Glass: Internal/external glass against accidental breakage.
The insurer usually restricts the particular kinds of losses covered. For example, a ‘peril’ is a potential cause of a loss. Perils may include fires, hurricanes, theft etc. The insurance policy may define specific perils that are covered or it may cover all perils with certain named exclusions (i.e. loss as a result of war or loss of life due to suicide).
A policy usually stipulates that losses are to be reimbursed only in excess of a stated threshold amount, called a ‘deductible’. Reasons for deductibles include (a) cost savings of processing the claim of small losses and (b) an economic incentive for the business to prevent losses that would lead to claim payments.
While it is tempting to pay your insurance each year without a second thought, businesses should take the time to review all policies at least every year (you may have purchased additional equipment or sold equipment, etc.).
Things to consider when dealing with an insurance broker
Find out if the broker has experience in dealing with businesses similar to yours.
Ask how the broker supports you in the event of a claim.
Request all quotes are provided in writing. Ask questions to understand the reasons behind their recommendations.
Be honest with the broker. The more information you give the more relevant the advice will be.
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