5 steps to Buying Business Insurance
Buying the proper business insurance is one of the most important decisions a business owner makes. Frequently, having the proper coverage is the only thing standing between success and failure, says Myles Murakami, president of Atlas Insurance.
1. Find a Qualified, Licensed Agent
“The No. 1 thing,” says Murakami, “is to find an agent or a broker you feel comfortable with.” Ask another businessperson you trust whom they use and if they’re happy with them. More importantly, ask why. “Every-body’s different,” Murakami says. “Everybody brings something different to the table.” Other things are important, of course: years in business, specialization, financial stability, etc. But the main thing is trust. “Everybody has to ask themselves, ‘Can I trust this person? Or is he here just to sell me something, whether I need it or not?’ ”
2. Assessing Risk
Your insurance should be tailored to your particular business. While many small businesses may be able to make do with a basic business owner’s policy — an inexpensive package that includes both property and liability insurance — Murakami points out your business might need more specialized coverage. Some frequently overlooked examples include: errors and omissions insurance, employment practices liability insurance, and director’s and officer’s insurance.
Your agent can also help you balance the costs of deductibles vs. premiums. Murakami notes that a higher deductible will mean lower premiums, but it adds to your risk. “Can you afford to pay that if you have a couple of accidents in the year?”
3. Shop Around
Because the cost and extent of coverage can vary from broker to broker — even if the carrier is the same — it makes sense to compare rates and policies. Just not too often. “We recommend that you don’t do it more than once every three years,” says Murakami. In fact, he notes, shopping too frequently may cost you in the long run. “The word gets out to agents and it paints a negative picture of your company.” Ultimately, he says, shopping around too frequently may decrease competition for your business.
Also, because policies can vary so much among insurers, sometimes business owners end up comparing apples and oranges. “We encourage our clients to go through a request-for-proposal process rather than a bidding process,” Murakami says. That way, each insurer is offering the same product. A good agent should be willing to provide you with a sample RFP.
4. Review Coverage at Least Yearly
Your agent should automatically review your coverage with you before renewing your policy each year. But, according to Murakami, you should reconsider your coverage “any time you’re doing something that you weren’t doing before.” If you expand into another area, he says, begin to sell a new product or service, or change the way you do business, you may also have created new risks and liabilities. Talk to your agent to make sure your coverage reflects the way you do business today.
5. Treat Your Agent as a Consultant
Today, your agent may be able to offer you much more than standard business insurance. “Insurance has evolved so much,” says Murakami, “we can now provide lots of business solutions.” Business interruption insurance, for example, might protect your business should a key supplier fail. Pollution insurance might facilitate the sale of industrial real estate. But, to take advantage of these tools, you have to involve your agent in your business, much as you’d involve your attorney or your accountant. “If you’re not using your agent as a true consultant,” Murakami says, “then you could be missing the proper coverage.”
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