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How Much Risk is Too Much? When to Look for Business Insurance Savings

Ryan Hanley

Vice Present of Marketing at Trusted Choice
Ryan Hanley is the vice president of marketing at TrustedChoice.com and the managing editor of Agency Nation. He is also a speaker, podcaster and author of the Amazon best-seller, "Content Warfare." Ryan has over 12 years of insurance expertise and blogs frequently to help consumers understand complicated insurance topics.

As a business owner, you know you need to have business insurance to protect your company from risk and liability. However, you do not necessarily need to purchase a policy that covers every type of risk. Instead, you can pick and choose to end up saving hundreds or even thousands of dollars every year.

There are minor and major risks that go along with your business. If you want to determine your coverage, think about anything and everything that could go wrong, as well as how much it would cost you to fix it. Also, consult with an insurance agent about what options you can do without in your policy.

If you do not know where to start, the following are the types of incidents that can occur that you may or may not need to cover with business insurance.

Shoplifting

If you own a boutique retail store, you might want to purchase business insurance that covers shoplifting. However, if you have many stores and serve thousands of customers every day, you might not want to get insurance coverage. That’s because it is simply not feasible to catch every shoplifter, and the chances are, they are stealing small items. Instead of buying this insurance, you can take other precautions like putting electronic sensors on big-ticket items, installing cameras and hiring in-store security guards.


Related: 3 Key Factors That Influence Business Insurance Rates

Server/electronics malfunctions

Businesses are utilizing big data now more than ever to speed up efficiency and gain insights on their customers. If you are collecting tons of data and placing it on numerous servers, you will need an electronic data policy to cover you. If you are only utilizing five laptops, then you may not need that policy. In its place, you can purchase property insurance, but even that might not be worth it because laptops are inexpensive and have a short lifespan. Replacing a laptop that breaks will most likely cost less than your insurance premium.

Large equipment issues

You may not want property insurance for your laptops, but if you are working with larger and more expensive equipment, it is a must. If you own a landscaping business and you have 25 lawn mowers, you should buy property insurance to protect them. Look at all your equipment, evaluate its value and decide whether or not you can absorb the risk on your own should anything happen.

Outside contracting issues

If you own a contracting business and routinely do work for other companies, you will need to purchase indemnification insurance. This insurance (which is usually part of standard policy) will protect you in case you mess up a job or do something that results in a liability claim and the indemnification will move to the company that hired you. For example, if you own a roofing business and a construction company hires you to work on a job, you will need to have them sign indemnification agreements stating that if a customer sues you for your work, then the construction company will have to pay for it.


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Avoidance: managing risk from the start

If you want to save your money and energy, avoid risky business moves from the beginning. For example, if you run a successful restaurant and you open a second one that is not making much profit, you are losing more than your business costs. Every day you are open, you are taking a risk. A customer may sue you or a waiter could slip and fall. It may not be worth it to keep trying to make it profitable.

You should practice safety no matter what kind of business you have. It’s always a good idea to create safety checklists for your employees, buy the proper equipment, do proper background checks on applicants, look at interviewees’ driving records, hire an experienced manager and encourage employees to stay home when they are sick.

As a business owner, you are dealing with risk every single day. But you don’t always need to take costly steps to curb it. By creating a culture of safety at your company and determining what business processes are actually worth covering, you will save money that you can use to invest back into your business.

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