FINANCING & BUDGETING • November 12, 2014
3 minutes Read
By Gene Marks
Small business influencer Gene Marks is a guest blogger for CAN Capital. He is a celebrated author, columnist and small business owner.
About seven years ago, a client was really upset with me over a software project that went seriously over budget. He threatened a lawsuit. Thankfully, we talked and worked it out, both sharing responsibility. It was that experience that motivated me to upgrade my business insurance policy to include extra coverage for professional malpractice. I’m sleeping better these days.
And so is a client of mine who, just over a year ago, suffered through a fire at her store that began in another store next to hers. She was not only reimbursed by her insurance company for lost inventory, but also for the business interruption. She’s sleeping better, too.
No one actually likes buying insurance. And you hope you never have to use it. But you have to have it. How good is your insurance plan? Do you have business insurance? Maybe this is the time to re-evaluate it. And if you don’t have it, this is definitely the time to get it. In either case, here are five things I’ve learned about insurance.
Be honest with your agent. Don’t hide your skeletons. Don’t think you’re doing yourself a favor by not disclosing your risks and trying to get a lower premium. The whole point of insurance is actually covering your risks. So this is the one time to be honest about them. How sell-able is your older inventory? How exposed are you to your competition? How vulnerable are you to fire or other types of damage? How safe is your neighborhood? How collectible are your receivables? These are questions that have to be truthfully asked and answered so that your insurance agent can make sure you truly have the right coverage. You can tell your customers and suppliers anything you want. But your insurance agent is one person who deserves 100 percent full disclosure. If this means you pay a little extra premium, then so be it.
Look for service, not pricing. The cheapest insurance is not always the best. Like with everything else, you get what you pay for. Sure, there are good companies that sell insurance online. But the most important part of it is your agent. Because when the you-know-what hits the fan, you want to be sure that your agent will be in the foxhole with you, and representing your best interests. Your business is all about assessing risks and smart business owners surround themselves with good advisors to help them make decisions. And a good insurance agent is as important as your CPA, banker and attorney. You should see this person two to three times a year. He or she should always pick up the phone, always be willing to talk and share advice with you and hopefully be networked in your community to introduce you to others who can help your business.
Get a couple of audits. If you’re really thinking of making a switch, or just buying insurance for the first time, have two to three insurance agents or firms meet with you. Let them walk around, kick the tires, ask their questions and make recommendations. Some will tell you how to create a disaster recovery plan or improve conditions in the warehouse. A good insurance person will provide free consulting services, recommending ways to improve safety, safeguard assets and protect yourself and your employees. You’re looking for someone who provides this free consulting service, because if they’re willing and confident enough to give their advice for free, they’re probably competent enough to handle your business.
Don’t forget the underwriter. Your broker is important, but even more important is the company who will be writing the check. And not all underwriters are the same. If we learned anything from the last financial crisis, it was that no one is too big to fail. This means that if you’ve got a problem, you want to make sure your underwriter is financially solvent to make good on their promises and also has a history of not being a pain-in-the-neck when it comes to paying out claims. A good broker will be upfront with you but you need to take time to investigate the insurance company online, get credit reports and ask other insurance agents and people in the know.
Finally – revisit your insurance every year. Don’t just think this is a one-off exercise and then blindly write a premium check every year. You have to re-visit it from scratch at least every other year. Things change all the time, and it will not take much of a change in your business (a big customer, added construction, new employees) to affect whether or not your coverage is still adequate. Also know that the world outside changes too – for example, insurance that covers data breaches and security issues have become extremely popular among small businesses. Do you have that? Right, neither did I.
These are just a few thoughts. None of us like insurance. But it’s important. And when you need it, you’ll be glad you have it.
Photo credit: Gunnar Pippel/shutterstock.com