Identify all who will require you to be insured.
1) Identify the types of insurance that will be required by a third party such as a client, landlord, mortgagee or loss payee and ask for those requirements in writing. Often times when acquiring an existing business, purchasers think that they can assume the insurance policies of the seller. As a general rule, insurance policies are not assignable so do not wait until the last moment to inquire about insurance as this will limit your choices.
What assets do you have to protect?
2) Analyze items on the balance sheet of the business such as inventory, furniture fixtures, computers, improvements and betterments. Also consider lease items as well as customers goods in your care, custody and control. Remember that accounting value does not equal replacement value. Insure the property for what it would cost to replace it and not depreciated value or market value.
Types of Insurance
3) Not only do you want to purchase insurance on your buildings and business personal property, but also your business income, general liability, employment practices liability, professional liability, workers compensation, vehicles, employee fidelity, key person life insurance, buy- sell arrangements and group medical.
Ask for a written proposal
4) Ask for a written proposal and invest the time to study alternatives. When you do receive your policy, take the time to read it to make sure that you received what you ordered. Identify insuring agreements, conditions, exclusions and limitations of your policy. If there something that you do not understand, ask your agent or company representative to explain it to you.
Insure at replacement cost
5) Insure property for the estimated current replacement cost and review those values annually to make sure that they meet the “insurance to value” requirements or coinsurance clause in your policy. Notify your agent when you make any additions, improvements or add inventory to your business.
Your Liability is unlimited
6) For liability insurance it is extremely difficult to predict the amount of a judgment that could be rendered against you. The sky is the limit so select the highest limit that you can afford.
Consider a High Deductible
7) Consider a deductible of at least a $1,000 on all Property insurance and even a higher deductible if the cost savings makes sense. You want to be protected for losses that would cripple the business, not for small losses.
An umbrella makes sense even when it is not raining
8) Higher liability limits can be purchased for relatively little more for the coverage that you get. Consider an umbrella policy which would increase the amount of General, Auto and Employers Liability limits. An umbrella policy can be purchased in increments of $1,000,000 for a fraction of the cost of the first million.
A Businessowners package policy provides best value
9) Purchase a business owners package policy if your business qualifies. A business owners policy is discounted with many additional coverage features thrown in for free or at a low cost.
Make sure your agent is a Professional
10) Look for an agent’s professional credentials such as the CPCU, CLU, or CIC etc designation. The designation signifies a high level of education and expertise along with a professional commitment to put the customer’s interests first.