I.I.I. Outlines Insurance Savings For Business

The Insurance Information Institute released a list of methods yesterday that small business owners and risk managers can use to cut their company's insurance costs in lean economic times.

New York-based I.I.I. suggested the following eight ways to save money on insurance coverage:

1. Shop around. Prices vary from company to company. Get the names of companies or brokers who specialize in the type of business that needs coverage and call several to compare prices and get a feel for the types of services they would provide.

Ask the agent or company that provides personal insurance whether they offer business insurance. It is also important to pick a company that is financially stable. Check the financial health of a potential insurer with rating companies such as A.M. Best Co. and Standard & Poor's.

2. Look at group rates, purchasing insurance through a business or professional organization to save money. Many different business organizations offer insurance plans and/or discounts on business insurance to members. The bigger the group, usually the lower the insurance premiums. The savings typically outweigh any member dues.

There are professional organizations for almost every business occupation from electricians and plumbers to writers and artists. General business organizations, such as a local Chamber of Commerce and the Better Business Bureau, also offer business insurance discounts. A local home-based business association may offer lower prices on home-based business insurance.

3. Choose a higher deductible. Deductibles represent the amount of money paid before the insurance policy kicks in. The higher the deductible, the less paid in premiums for the policy.

4. Consider a package policy. A business owners policy (BOP) is often significantly less expensive than a self-designed plan. BOPs include: property insurance for buildings and company-owned contents; business interruption insurance, which covers the loss of income resulting from an insured event (such as a fire) that disrupts the operations of the business; and liability protection, which covers a company's legal responsibility for the harm it may cause to others.

To determine whether a package policy is suitable, inventory the business property to determine its value and whether it needs to be insured, then compare the property and values to what is available in a particular package.

5. Set up a risk management/loss reduction program. Insurers will often lower rates if a program is put into place that will minimize losses from fire, theft, and employee and customer injuries. These can include workplace safety training programs, disaster preparation and human resource intervention.

Consider installing a security or fire system. If the business uses vehicles, install anti-theft devices and hire drivers with good driving records. If possible, reassign drivers with bad driving records to nondriving tasks.

Ask what can be done to reduce risks such as fire or work-related accidents and review the procedures that should be in place in the event the business suffers a major catastrophe.

5. Consider relocating the business. Deciding whether to relocate depends, to a large extent, on the kind of business being operated and where it is moved to. Moving from a downtown area to a suburb, for example, may reduce premiums on property and vehicle insurance, and even workers' compensation insurance.

6. Work closely with an agent or broker. An insurance professional can provide invaluable advice to help protect a business. It is important to keep the insurer informed about any changes in the business operations. This includes major purchases, expansions or changes in hiring or in the nature of operations.

7. Have the right amount and type of coverage.

Part of the decision about what insurance to buy depends on the nature of the business. For example, if the business has a lot of assets, it might consider theft and property damage insurance. Life insurance might be considered for the business owner and critical personnel in the organization.

Various other forms of insurance may be considered, for example, directors and officers (if there is a board of directors) or business interruption.

8. Having the right amount and type of coverage along with a carefully developed business plan that includes disaster preparedness can save money in the long run. Be sure to keep the agent fully apprised of any changes within the business that might necessitate changes in insurance coverage. Such changes may include: adding employees, expanding, increasing inventory or materials, purchasing major equipment such as tools or vehicles, and adding suppliers.

I.I.I. said more information is on its Web site at www.iii.org, and the publication, "Insuring Your Business: A Small Business Owners' Guide to Insurance, is available online or in a print edition from the I.I.I. store for $28, with quantity discounts available.