Business insurance is not a nice-to-have but a necessity. Getting the right coverage should be an essential part of the initial start-up checklist for every small-business owner. It is especially important to have protection again public liability and professional indemnity risks as a claim from a client in the early days can stop your business in its tracks before it even gets off the ground.
A risk assessment is the critical first step to ensuring you get the appropriate cover. A hairdressing salon in a small town hardly has the same insurance needs as an advertising company with expensive printers and computer equipment. If you are giving advice to clients, you will need professional indemnity in the event that someone suffers a loss as a result of the advice you gave them.
The best way to eliminate risk is to make changes to the way you do business where possible. This includes making changes to the layout and physical environment of your operation. Perhaps it is increasing the physical security at your premises to avoid theft. It is also important to document your business systems and processes.
After this, you can look at which risks you are still exposed to in order to determine which risks you need insurance cover against. If you short cut this, you will end up paying for insurance you don’t need and policies that you will never be able to claim under if something happens.
Remember, when it comes to insurance you are not “buying” the premium. You are buying the cover that the policy will provide. Most insurance companies are only interested in selling their products to you. Business owners should also be wary of purchasing an off-the-shelf business insurance package which promises holistic cover against a range of business risks. For some businesses, these packages might be adequate. However, the insurance needs of companies differ based on the nature of their business.
Rather, find a qualified and reputable adviser or broker who will be able to conduct a comprehensive risk assessment to determine your exact business insurance needs. A broker’s role is to always look after your best interests, not the interests of the insurance company. They have access to many insurance companies so they will look for the provider with the most comprehensive cover for your needs. They have firsthand experience of how different companies deal with claims too. Sometimes they will find a lower premium for you, but remember you are looking for the right policy, not the cheapest.
In my view, insurance that will enable you to keep your business operating in the event of a major fire or other catastrophe is absolutely essential. This is where a good insurance broker, one who understands business finances and the difference between gross profit and net profit, is so important. There are so many additional costs for most businesses when you’ve had a disaster and yet have to keep paying many of your variable expenses including wages to your staff!
You have to realise that insurance isn’t like an investment. You can never expect to “get a return” when making a claim. What you want is an insurer working with you to help you recover from the incident as quickly as possible. Do the due diligence, educate yourself on the basics of business and risk management and find a good broker who can help tailor your cover according to your business needs.
Stephen Wanmer, certified ActionCOACH