The small business guide to cutting insurance costs
If you're like most small-business owners, chances are money is never far from your mind, especially when it comes to dreaming up ways to stretch your dollars a bit further. At the same time, you've worked too hard to cut corners when it comes to protecting the investments you've made in your business. So while you may be tempted to forego business insurance, you know the stakes are too high to leave your company vulnerable to the high cost of property damage, liability lawsuits, and business interruption.
But is there a middle ground? A way to secure the small business insurance coverages that protect your finances without breaking the bank? You'll be happy (and perhaps surprised) to know that there are a few ways you can pare down your coverage costs without sacrificing your peace of mind.
How to save money on small business insurance
Here's a brief primer on how to keep your insurance rates affordable:
Purchase a business owner's policy
Oftentimes, you can find essential insurance coverages bundled together at a discounted rate. This is true for the coveted business owner's policy (or BOP), an insurance package designed to save small-business owners money. A BOP groups together and cuts the costs of general liability insurance, property insurance, business interruption insurance, and a variety of other riders.
You have to meet certain qualifications in order to purchase a BOP, such as having small commercial premises and a low risk profile. If you are eligible, you'll have financial protection for an array of costly situations, including slip-and-fall accidents on your property, property losses or damages, and lost income when a covered claim forces your business to temporarily halt operations. (To find out whether your business is eligible for this affordable plan, talk to an Insureon agent today!)
Create a comprehensive risk management plan
Perhaps one of the most effective ways to keep your insurance rates low is to manage and mitigate risks before they have the chance to become a claim. For example,
- Set up a central station burglar alarm to reduce the risk of property theft.
- Procure and use an ID scanner so your restaurant, bar, or liquor-selling establishment doesn't accidentally sell alcoholic beverages to minors.
- Properly train your employees to reduce the risk of professional mistakes and on-the-job injuries.
- Use walk-off mats at your building’s entryways to reduce the risk of slips and premises liability lawsuits.
Of course, these are just some starting ideas. Ultimately, your industry will determine the risks your business may face. Be sure to take inventory of the potential losses your business could come up against and outline an action plan for deterring those accidents and liabilities.
Properly classify your employees to save on workers’ comp costs
You can control your company's workers' compensation insurance costs by using the correct industry classification codes for your employees. That's your annual workers' comp premium is calculated in part by multiplying your payroll by class codes according to the type of work your employees do. There are over 600 class codes that correspond to professions, each code with its own level of potential risks and its own price.
So if you classify all your employees under the same code, you could be subject to an audit. It could also mean that you could potentially overpay for your Workers' Comp coverage if you group employees in a higher-risk code than they belong in.
Exclude yourself from your workers' comp policy
Sure, most states' Workers' Comp laws allow sole proprietors to cover themselves with occupational injury coverage. (You can read more about that subject on our page "workers' compensation insurance laws by state.") But you can reduce your policy's premium if you don't include yourself on the plan.
Choose the right payment plan
Most insurance plans give you the option of paying monthly or annually for coverage. Paying on a monthly basis is typically more budget-friendly, but paying in bulk will save you money in the long term.
Adjust your deductibles and limits
As a rule, the higher the deductible you take on, the lower your premiums will be. (For reference, a deductible is the amount you pay out of pocket before your commercial insurance benefits kick in.) This may be a cost-saving option for your business if you work in a low-risk industry and don't expect to experience many claims in a policy year.
Another consideration is to go over your policy limits with your insurance agent. Your coverage limits should be adequate to protect your finances. However, you may need to reduce your limits if you've downsized your commercial premises, you've had to lay off employees, your revenue has significantly decreased.
On the other hand, maybe you need to increase your limits, but you don't want to increase your spending. If so, an umbrella liability / excess liability insurance policy may be right for you. This policy offers additional coverage that can be applied to many liability policies.
Make workplace safety a priority
Creating a safe environment for your employees is one of the best ways to reduce the risk of workers' comp claims and liability lawsuits. Be sure to implement an ongoing safety-training program that minimizes the risk of occupational illnesses or injuries. This may include:
- Properly training new employees on how to perform their jobs safely
- Making your employees aware of your small business's safety program
- Holding workshops or seminars about safety-related issues that affect employees and present hazards in your industry
- Providing incentives or rewards for employees who demonstrate outstanding safety records or awareness
For more ideas about creating a safe workplace, check out the Occupational Safety and Health Administration's website and search for your industry.
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