What to Consider During Your Business’s New Year Insurance Review
November 28, 2019As the final days of the calendar year loom closer, there are probably a lot of items on your to-do list. One item that should be added to your list, if it’s not already on there, is a New Year insurance review. This is a thorough review of your insurance policies and coverages.
January 1st is a popular expiration date for many insurance policies. If this is your policy’s effective date, starting a month or two in advance will keep you right on track to have your policy review completed prior to the renewal date. You will still be able to make necessary changes after renewal, but the process can be streamlined, from a paperwork and billing standpoint, by coinciding changes with the effective date of your policy.
Even if your policy does not renew January 1st, a comprehensive review, even during mid-term, can be highly beneficial. The start of the new year is still a good time to do this, as many businesses have their fiscal years set up to run concurrently with the calendar year. This means that during the same time that budgeting for the upcoming year is being determined, a good look at the business’s insurance policies can occur.
Here are a few things to consider during your business’s New Year insurance review to ensure that you are covered correctly when going into the next coverage year:
1. Review Your Business Inventory
Take a good look at your business’s inventory before you review your insurance policy. Your inventory includes things like office equipment, miscellaneous supplies, vehicles, machinery and mobile equipment, tools, etc. For insurance purposes, be sure to include the buildings the business owns. If a rental contract requires your business to carry insurance on a rented structure, include them as well.
Hopefully, you have kept a relatively accurate inventory list and all it needs is a little updating. However, if you don’t have an inventory on record, now is the time to make one. Once you have items listed, go through and assign a value based on the cost to replace the item with a new item of like kind and quality. You also want to add another value that is representative of the item’s actual cash value, or in other words, the new cost minus the depreciation that has been incurred.
This list will help you and your insurance agent determine how much property exposure your business has and will provide a guide for how much insurance should be purchased.
2. Review What’s Covered on Your Current Policy
The next thing you will want to do is compare your property inventory with the covered items on your insurance policy. If you aren’t sure where to find all of these items on the policy, reach out to an experienced independent insurance agent to have them help to walk you through your policy review.
If there are items that have slipped through the cracks over the past year, be sure to add them to the policy. Likewise, if any new equipment has been purchased, new locations acquired, or new buildings constructed that have not been added to the policy, be sure to talk with your agent about getting coverage for them.
Be sure to do the same with any new business operations that have started within the past year that create new or different liability exposures than what is listed under your business’s classification on the Liability section of the policy.
Changes in your business operations should always trigger an insurance review to make sure you are covered. Because so many businesses have had to pivot or change their business operations, this has been one of the most common reasons to review insurance during COVID-19.
3. Review What Policies are in Place
Many business owners don’t take a very active role in their insurance buying. The result is that sometimes business owners believe they are covered for all types of losses because they believe they bought one, all-encompassing insurance policy. The end of one year and beginning of another is a great time to dig a little deeper into your insurance portfolio and get a better handle on just what types of policies you have in place to protect your business from losses.
Here are some examples. If you have a vehicle titled in the business’s name, you need to have a Business Auto Policy. If this commercially titled vehicle is covered on a Personal Auto Policy, you could have some serious issues at claim time. If your business maintains digital records for clientele or takes electronic payments, you likely should be considering a Cyber Liability Policy.
If your business is engaged in the furnishing or sale of alcohol, a Liquor Liability Policy is a must-have. If certain types of losses would shut your business down for an extended period of time, you may need to consider adding Loss of Business Income to the Property section of a Commercial Package Policy.
These are just a few examples of types of policies and coverages that may need to be included within your insurance portfolio, depending on the scale and scope of your business operations.
4. Review Your Insurance Costs
Reviewing insurance costs on a year-over-year basis is something that every business owner should be doing. Small fluctuations are not a cause for alarm, as they are often just an indication of market trend or a carrier’s overall book-of-business performance over the past several years. However, large increases could indicate that it is time to ask an independent agent for a comparative quote.
What to Consider With Requesting Comparative Quotes
Before you take this step, keep two things in mind.
Make Sure the Increase is Not Due to Additional or Increased Coverage Before Requesting a Quote
First, be sure that the increase in overall cost has come from a significant rate increase. This would come from your insurance carrier for your classification of business. It would not come from something like an optional coverage enhancement that was added to your policy, from additional equipment or property items added to your policy over the past year, or from a policy audit that found your sales or payroll to be in excess of the estimate that the policy premium was based on at the beginning of the year.
Ensure the Coverages are Comparable and the New Quote is Not for Less Coverage
Secondly, when you receive another quote, be sure that the coverages are comparable. Make sure you ask “is it actual savings or less insurance?” as you evaluate them. It is not hard to save money on your insurance policy costs by simply gutting your coverages.
If you are interested in saving money by giving up coverage or significantly lowering the coverage limits on your policy, you can easily do that by just changing your current policy. So, if you are getting another insurance quote, make sure you are comparing apples to apples.
The end of the calendar year is a great time to conduct a New Year insurance review and go over all of your current business insurance coverage. This gives you a fresh start with your insurance policy heading into the new year. Plus, you can enjoy the stress reduction that comes with knowing that your policy has received a thorough review and you have made sure that you are appropriately covered.
If you would like a licensed, experienced, and dedicated commercial insurance agent to help you conduct a year-end review of your current insurance policies or provide you with a new quote, give Ruhl Insurance a call today at 1-800-537-6880 or 717-665-2283 and we can help assist you with the process from start to finish.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.