An unexpected drop in sales, a competitor opening across the street, the loss of a key employee. Planning for these types of contingencies can be vital to the long-term success of a small business. Equally important is having appropriate insurance coverage for protection against financial losses resulting from accidents, natural disasters, lawsuits, and other risks.
Conducting an annual insurance review can help ensure that you have the right insurance for your company’s needs. Start by asking these questions.
How Much Insurance Does My Business Need?
It’s likely that you already have commercial property and general liability insurance coverage in place. You need to determine if your coverage is sufficient, especially if there have been changes in your business’s operations. You might need to increase your coverage if, for example, you have upgraded or added new equipment or if you have expanded your physical footprint.
You may be able to reduce the premium on a policy by raising the deductible. However, make sure the deductible isn’t more than the business can afford to pay.
Are There Gaps in Coverage?
As you review your policies, determine if there are any coverage gaps. The world changes, and so do the areas of potential vulnerability for businesses. For instance, employee lawsuits alleging sexual harassment, racial or age-related discrimination, and retaliation are more common now than in the past. If you don’t already have it, consider buying employment practices liability insurance that provides protection against such lawsuits.
In addition, cybercrimes that involve ransomware, the theft of confidential data, or hacking into a business’s bank accounts are issues of real concern. Cyber insurance can protect your business against significant financial losses if, despite your best efforts, your systems become compromised and criminals manage to access them.
Should We Have Key Person Life Insurance?
Envision how your business would cope if you, a partner, or a key senior manager were to die suddenly. What impact would it have on the continued viability of your business? Key person life insurance can provide a financial cushion to help a business in such a situation.
The way key person life insurance works is fairly straightforward. Typically, the business buys the policy, pays the premiums, and is the beneficiary. The policy payout can be used for a variety of business purposes. For instance, it could be used to compensate for lost sales and interrupted cash flow or to pay off debts.
A financial professional can explain in more detail what to look for when reviewing your company’s insurance coverage and may have suggestions about ways to provide even greater protection for your business.
