If you own or operate a business, large or small, you know the importance of insurance to protect yourself against financial losses. A broker is qualified to advise you on how to make the most out of your insurance.
Businesses require insurance in order to:
Protect their physical assets, the investments they've made in technology, equipment, etc.;
Protect them from legal liabilities to third parties and to provide them with legal assistance and defense in the event of a lawsuit;
Protect their financial balance sheets to give owners peace of mind. Knowing their physical assets can be replaced and knowing lawsuits will be defended, provides stability to the balance sheet so that an owner is not vulnerable to having to self-insure;
Finally, thanks to the peace of mind provided above, to reinvest profits into their businesses, employees or research, this in turn is good for the economy and health/welfare of any business.
A Risk Management Program is the best way to systematically reduce the impact of risk.
An experienced commercial broker knows how to identify and manage many of the risk factors in your business and translate that knowledge into a cost-effective risk management program. There are four key steps:
Know your risk exposures.
The first step is to accurately identify and analyze the risk exposures to your tangible and intangible property, your income, personnel and liabilities. These can be determined in a thorough audit of your office, warehouse or shop floor to identify all perils, probabilities and potential consequences.
Consider the risk management
Insurance is one form of "financing" your risk, but there are other alternatives to explore. These include eliminating the exposure, loss prevention, loss reduction and contractual transfer of responsibility for losses, for example, when a lessee assumes the liability for damages to leased space. A thorough risk management plan will examine all these alternatives before getting to the issue of insurance.
Commercial insurance is the most widely used of all risk financing techniques because of the cost-effective protection it provides. General and specialized policies can cover just about any peril. Another way to manage risk is to be financially prepared for a loss. One way to do this is to accumulate your own capital reserves to cover the loss, but this can tie up large amounts of capital at low rates of return.
Implement your plan.
With loss prevention and reduction plans in place, your broker can help you implement your insurance program with one or more multiple insurers.
Monitor and adapt your plan.
Make sure to adapt your plan to match the changes in your business, including geographical expansion, physical growth, new lines of business or increased complexity. Consider an annual review of your needs with the help of your insurance broker.
A bit of planning and an ounce of prevention can save you time and money.
Special policies can cover the risks unique to your business.
This form of insurance provides you with the funds required to protect your business financial position if your operations are interrupted by an insured loss such as a fire. Features and costs will vary considerably depending on whether you insure for named perils, a specific timeframe, specific costs or just a portion of the income you lose. This form of insurance is highly customizable.
A consequential loss is not caused directly by damage to property but is a consequence of other damage. For example, a greenhouse operation or a winery might require constant temperature and humidity to be maintained and would insure against the consequences of an extreme change in those factors.
Many name perils and broad commercial property insurance policies will exclude coverage of breakdown or damage to highly sensitive or specialized equipment including high-pressure boilers, control systems and computers, diagnostic equipment and more. Special machinery policies can be obtained to cover equipment for sudden and accidental breakdown, which is advisable if loss of use is a significant risk for your business.
Errors and Omissions
Errors and omissions insurance is usually used in professional services firms such as law, accounting and consulting to protect professional staff from the impact of errors or omissions in their work.
Director's and Officer's Liability
It is common practice to protect company directors and senior managers from personal liability for actions that are the responsibility of the company they direct. While insurance does not remove their fiduciary duty, it does provide some financial protection from legal liability for a claim made against them for an alleged or wrongful act. A wrongful act is any error, misstatement, misleading statement, act omission, breach of duty or neglect allegedly committed or attempted.
Other Specialized Coverages
There are as many forms of specialized coverage as there are risks to your business. A broker can help you assess the probability of experiencing a loss and determine whether or not you should purchase specialized coverage. Talk to your broker to see if there are risks unique to your business that require extra protection. For example:
Crime - designed to protect against loss of money or securities, including theft overnight or on the way to the bank. This also includes employee dishonesty.
Electronic Data Processing Systems - protects your computer and its data
Sewer Back-up - covers loss or damage caused by the backing up of sewers, sumps, septic tanks or drains.
By-law Coverage - covers additional expenditures resulting from by-laws regulating construction when reinstating a building after a loss.
These are just a few of the special
coverages available for special situations.
Your broker can tell you more.
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