Keep Exposures Covered

January 2011

If you don't pay attention to your insurance coverages, you're missing out on the opportunity to save money and ensure that you're protected as well as you should be. If you don't account for structural property changes and even increases and decreases in business, you may be doing yourself more harm than good. An annual insurance assessment is one of the best ways to mitigate risk.

"It's not unusual for a business owner to simply send back last year's policy requirements unchanged," says business finance consultant Mike McDermott. "Re-evaluating on an annual basis can be time-consuming. But if you've put more money into your business, including any improvements or additions you've made, you want to make sure you're covered for full replacement costs or the tenant improvements you've paid for. If your exposures have changed in any way, you need to account for it in your policy for renewal each year."

While it may take time and produce paperwork, the assessment itself is not that difficult, at least from the perspective of the business owner. The carrier first performs an audit of your current coverages and, in most cases, then undertakes an on-site inspection. Typically, a carrier will utilize their own assessment tools in evaluating your potential risks or exposures.

Using that information, the carrier then goes back to your policies, exploring every facet of your property and liability coverage, including buildings, contents, business income, liability (including professional and excess liability, employee dishonesty, employment practices liability, and more). Once the assessment is complete, your agent will sit down with you to go over your current risk, how much you're willing to take on, and any necessary adjustments to your policies.

In addition to making you aware of your overall exposures and risk, performing an annual insurance assessment offers several other benefits. Having a formal policy can make you an attractive client for other insurers, it can help protect you in a court of law should you ever have a lawsuit based on safety issues, and it can get you the best possible pricing and credits.

Having a formal assessment policy in place is critical in order to make you aware of the potential safety and other hazards that exist and also in order to build insurance coverage specific to your needs. The assessment also creates an awareness of the claim-producing hazards that do exist, and if you can reduce those, you can potentially lower your insurance costs.

"Your goal is to be properly insured so that, in the event of a claim, you're covered," McDermott states. "The more information you give your carrier, the better the coverage. And simply getting the same coverage you had the year before is probably less than you need. An annual assessment is about having as much of your exposure accounted for as possible."

Sources: "Minimize Your Risk with an Annual Insurance Assessment," Trendline

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