Insure This By Bill Velin

Start the New Year Becoming a Smarter Insurance Buyer

well-designed business insurance program is essential when it comes to protecting your business from the many risks you face every day. It can pro- vide you with an invaluable financial shield from losses, but you must decide what type of insurance to buy, how much to buy, and from whom to buy it. There is only one way to make a wise choice when it comes to purchasing insurance and that is to make sure you know what questions to ask.

A

Information is the key to finding the best coverage for your business, and much of that information will come from you. You will need to compile at least the following information for your agent in order to begin the process:

• Copies of your current business poli-

cies or, if you prefer and actually received one – a copy of the formal written pro- posal for the current policy. • Updated payroll and sales records. • Current financial statements. • Claim information from the current year and the three prior years. • Updated vehicle and driver schedules • Any promotional literature on your company.

Once your insurance information is in

order, it’s time to assess how much “risk” you would like to retain. Insurance is a method of allowing you to “transfer “ the risk of financial uncertainty to an insur- ance company in return for a known pre- mium. So the first thing you want to calculate is how much of the financial uncertainty you are willing to take on and how much risk you want an insurance company to assume.

The risk you retain is the deductible, while the risk the insurance company assumes is the limit of liability over and above the deductible. Generally, the pre- mium you pay will depend on the deductible you are willing to assume if a loss occurs. By choosing a higher deductible, you retain more risk and pay

16 Automotive Recycling | January-February 2016

Insurance provides essential protection which can mean the difference between survival and failure of your business in the face of a catastrophe.

a lower premium; and, the lower the deductible, the higher the premium. When premiums are high or cover- age is difficult to obtain, you may want to choose a higher deductible and pay for all losses under the deductible out of your pocket. The premium savings you will realize makes the most of your insurance dollar, providing you with maximum protection against losses that can result in bankruptcy, debt financing, or the postponement of future business plans.

Once you have provided your agent with the information you have compiled, you can expect to receive a comprehen- sive quote from an insurance company. You should review the quote in detail with the agent for the following information: • Have the payrolls been correctly sep- arated and is the premium based on accurate payroll estimates? • Is the auto schedule accurate? • Does the quote include all the cov- erages you and your agent identified on the application?

• Does the quote include umbrella cov- erage?

• If you need product liability coverage, is that included in the quote? • Is the property written on an “all-risk” basis or a “named peril” basis? • Is the liability written on an occur- rence basis or a claims-made basis? • Are the policy limits high enough? Are they higher than you need? • Are you going to receive actual cash value or replacement cost for damaged property?

Keep the following in mind:

• Make sure you have insured for the proper values of your property to avoid coinsurance penalties.

• Property coverage should be extend- ed to cover leased equipment. • Coverage should always be provided for lost rental income or loss of business income as a result of damage from an insured peril.

• Limits should be adequate to protect against all perils.

Liability coverage should provide cov- erage for claims from damages arising from your business premises as well as for damages arising out of your goods or products manufactured, sold, handled, or distributed by you. Finally, it is very important to choose which agent you want to take your account to the insurance marketplace. The following questions will need to be answered in choosing the right agent: • How are you treated when you call the agency? Is the agency courteous and responsive? Do they quickly follow up on your requests or do you have to contin- ually prompt them?

• Does the agency deliver quotes in a timely manner, and what does the agency do to ensure efficient handling of claims? Insurance provides essential protec- tion against unexpected financial loss – protection which can mean the differ- ence between survival and failure of your business in the face of a catastrophe. Since your financial health can depend on the quality of your business insurance, it is critical to consider all of the above fac- tors in order to make an informed insur- ance – buying decision.