BUYING INSURANCE LIKE CHINESE FOOD:
Certain specialized coverages (Workers' Comp, for example) may only be available separately, however you should always purchase packaged insurance to the greatest extent possible, and preferably from a single source.  Always look for insurance on your property (buildings, equipment, inventory, etc.), business income, and public liability in a single package. You'll generally receive much broader insurance at the lowest price, and if you purchase everything from a single source there is only one party to hold responsible for the screw-ups.

FINANCING PREMIUMS:
Premium financing is the closest thing to guaranteed, obscene profits on a scale equal to rock stardom or NBA residency.  Some commercial insurers offer low-cost installment plans, but many demand all cash up front. Like cars or clothes, you can sign on for a great low-priced insurance policy and make financed premium payments that will balloon your actual cost to an unbelievable number without realizing it. Shop for premium financing carefully, as rates vary widely.  You may actually find an ordinary credit card a cheaper source for cash to pay.

BUYING FROM UNKNOWNS:
The great medical care wisdom also applies to business insurance, i.e. don't get it from a stranger. Always try to deal with someone you know or someone who comes from a known reference. It is astounding how many people will purchase this product which may determine the very survival of a business by using the yellow pages or responding to a random phone call. Also be aware the agent you found on the web at a well-known site may be some guy sitting at his bedroom pc in his underwear. Maybe he has a license, maybe he doesn't. Maybe he has a real insurance company, maybe not.

BIDDING INTO OBLIVION:
The common advice that you obtain bids from three agents or sources is arguably wise, but taken to an extreme may actually backfire.  In addition to your having a small army of broker-agents to pester you, underwriters at the companies they approach may be annoyed at receiving requests on the same business from several agents & refuse to get involved. (The business insurance community is much smaller than you might think.) Consider trying both an independent agent and a direct-writer agent for quotes.

REPORTING FORM POLICIES:
If your inventory fluctuates significantly over the year and in an unpredictable manner, you may be faced with this type of policy. It requires that you report the value of your inventory on a very strict schedule, usually monthly. Errors in reporting or late reports can result in horrendous penalties if you have a loss.  Avoid these types of policies unless there just is no practical alternative.

CLAIMS-MADE POLICIES:
Used commonly in professional liability, pollution liability, and certain other specialty or high-risk lines, claims-made policies require that the event which produced the claim, as well as the damage or injury and the actual filing of the claim itself all take place before the policy expires. (Or within some specified reporting period.)  Failing any of these three conditions, the claim is not covered. This type of policy has been used in Contractor's Liability insurance as well as certain other marginally-profitable categories to limit losses. These policies vary widely in terms, price and deductible, and have been utilized to produce much lower than average rates, as they control what insurers refer to as the "Tail." (Meaning claims filed after policy expiration.)   In certain insurance lines, this may be the only policy available.

LYING TO OBTAIN CHEAP RATES:
Deliberately misrepresenting your risk to an agent or company representative may get you low rates, and you may even sleep well under the delusion that you have insurance. Unfortunately, if and when you have the big one, your lying could mean you simply bought nothing.  You may get the nickle-and-dime claims paid without much question, but carriers go to great lengths using almost unlimited resources to investigate the big ones and will refuse to pay when you misrepresent your risk.

REFUSING TO COOPERATE/REFUSING TO SETTLE:
All insurance contracts require your cooperation with the adjuster in proving your loss, responding to lawsuits, etc.  If you fail to do so, the insurer may have grounds to withdraw & void your policy.  In liability claims, the insurance carrier generally has the exclusive right to settle claims against you, and your influence is limited to whatever persuasion you can exercise on the adjuster.  Some professional liability insurance policies for doctors, lawyers, etc. require the insured's consent to settle.  The penalty for refusing settlement, however, is that you usually take on responsibility for any final legal settlements which exceed the figure your adjuster proposed.

BUYING COMMERCIAL INSURANCE FROM PERSONAL LINES AGENTS:
The person who did such a good job on your Homeowner's or Auto insurance policy may not have a clue about insuring a business.  Personal insurance agents normally avoid most commercial like the plague. Some, however, take on projects well beyond their ability. This is especially true of captive agents for the large direct-writing insurers.  (Although independent agents do it too.) Keep in mind that agents of direct writers have no particular responsibility to you, owe their primary loyalty to their company, and usually have only that one carrier's products.  Direct writers are known to offer some excellent and competitive business packages, but buyers must be extremely cautious in selecting an agent.

USING ACCOUNTING VALUES AS INSURANCE VALUES:
Amounts of insurance required on your property for insurance purposes can be entirely different from accounting or book values. Insurance limits should reflect actual amounts you need for replacement at current prices, not amounts generated for accounting or tax purposes

BUYING GOOD INSURANCE & GIVING IT AWAY:
Businessowners routinely succumb to customer and other demands for notice rights, additional insured status, named insured status, even limits preferences in settling claims. This typically takes place when there is a considerable power imbalance in the relationship. Keep in mind, however, that when you give preferences in your insurance to others, you risk potentially having your own protection given over to them and being without the very coverage you paid for.

FALLING FOR THE TOO-GOOD-TO-BE-TRUE:
The old proverb applies especially here, because you may discover an insurance product you bought is worthless only when or if you need it to save your business or property. Remember, like any other business, insurance companies must sell their product for more than it costs in order to survive.

Home

Site Index