Let's be honest: Insurance is a drag. Paying to protect a company from hypothetical crises and unlikely "acts of God" is the last thing most business owners want to do.
But the benefits are clear. If disaster strikes, insurance is the difference between surviving and shuttering your doors. And a less apparent but still powerful benefit is that insurance can make you look good to potential clients.
“Having a comprehensive insurance program allows you to say to your clients, ‘Our insurance program does more than just protect us. If you’re brought into a lawsuit due to our negligence, it can safeguard you, too.’ That’s going to be attractive to a lot of clients,” said Charlie Phillips, Vice President of the brokerage Phillips Bros. Insurance.
Insurance as a competitive advantage? We’ll take it.
But first you need to master the basics, from choosing a plan to using it well. Here’s everything you ever wanted to know, and more, about making insurance work for you:
Choose the right agent. Just because you have a good relationship with the agent who writes your homeowner's insurance doesn’t mean they should handle your business insurance. Find a broker with both startup and industry-specific knowledge who will be with you long term.
“You don’t want someone who will come in one time and then transfer you to some service center and disappear, pushing you off to a team,” said Phillips. “You need an expert who will stick by your side as you grow from three employees to 300.”
Get recommendations from your advisors, investors and other entrepreneurs you trust.
Be proactive. Too many startups buy insurance on an ad hoc basis, reacting to needs as they crop up. When a startup signs its first lease, for instance, a landlord will typically require that the lessee buy general liability coverage.
“A lot of startups will find someone who can simply check that box, rather than use this moment as an opportunity to take a thoughtful look at your company’s overall needs,” said Phillips. “It’s better to get ahead of your risks with a comprehensive plan, rather than just reacting to each situation.”
Look past price. The most expensive program is not necessarily the best program for you. For a company that only does business locally, it makes little sense to buy a program that automatically includes coverage for international exposures.
“You don’t always need a Cadillac to get to your destination,” said Katherine Drengler, Assistant Vice President of technology and e-business markets, CNA. “You do need to sift through the many features in a program to know if it covers your specific needs.”
Embrace realism. Your insurance company develops a premium charge according to the revenue and payroll projections you give them. Don’t estimate $10 million when $3 million is more likely.
“Since many policies are not subject to audit, that’s money you won’t get back,” said Drengler.
Use it. If you’re like most business owners, once you buy a plan, you stick it in a drawer until you file a claim. In so doing, you’re neglecting to capture its full value.
Typically, your premium covers an array of “risk control services.” Find out what’s offered. Your insurance company may provide ergonomic training to reduce employee injury, for instance, or inspect your building to recommend risk-reducing improvements.
Prepare for client contracts. Most contracts you’ll enter into, including those with new clients, contain rigorous insurance sections. Drengler fields many calls from companies who are surprised by a contract’s high limit requirements.
“It’s sometimes appropriate to negotiate down those limits, but it’s best to look beyond what you’re forced to carry and instead understand what you feel you need to carry,” said Drengler. “It’s really about your risk comfort level, in addition to meeting contract requirements. Comprehensive coverage could set you apart from your competitors and allow you to win more business.”
Photo via Shutterstock
CNA is the country’s eighth largest commercial insurance writer and the 14th largest property and casualty company. Learn how they can help you meet your insurance needs, including by connecting you to the right brokers, like those at Phillips Bros. Insurance.
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