9 Key Insurance Due Diligence Questions every Small Business Owners should be asking their Insurance Agent.
Does the insurance cover all the risks my business faces’?
First and foremost, any insurance due diligence review should determine whether the small business bought the right policies in the first place. This is not always as easy as it seems and this is why it is crucial to consult the guidance of an experienced independent insurance agent. You should speak long and honestly with them about the actions you do and do not partake in on a daily basis. They can help you identify risks you did not know your business faces.
Who is insured?
It is important to understand what and who is and is not covered under your specific insurance policies. This can determine how you operate your business on a daily basis. For instance, if you have a commercial auto insurance policy and it only covers people specifically reported on the policy than you need to be aware of this if you hire new employees mid term. Commercial auto policies can be sold on a different basis and each carrier has their own policies for who is and who is not covered under the policy. Do your due diligence and by consulting with your agent so that you are clear who and what is covered under the policy.
Does the policy have any unusual exclusions?
There are many exclusions that apply to most insurance policies. Most exclusions have a reason and it is important to know what they are and how they apply to your business. When an incident occurs is not the time to be concerned about exclusions. Most business owners are busy people. When purchasing commercial insurance they are usually strapped for time. Most business owners wonder why an insurance agent has to know so much information about your business just to give you a quote for coverage on your business. There are several reasons for this. Some of them deal with regulations, but if you have a good agent they are attempting to protect your business properly. It is human nature to think a salesman is offerring you something simply to make more money for themselves, but insurance agents deal with claims on a daily basis. They deal with clients on a weekly basis who have had something terrible happen to their business and more often than not they have to explain to business owners why their insurance coverage does not cover the claim. Taking additional time when purchasing coverage can prevent your business from having to bear the cost of an incident when a claim occurs.
Are there flexible payment options?
Pay as You Go Workers Comp Insurance Coverage is one option that can help businesses pay for their coverage monthly based on payroll instead of in one lump sum. Pay as You Go Workers’ Compensation benefits businesses by freeing up cash for more immediate business needs, by preventing over or under paying and by drastically lowering the likelihood of a mid-term audit by your insurance carrier. This is especially helpful for cash strapped or seasonal businesses.
Am I classified properly for workers’ compensation?
This is extremely important for your business cash flow. Especially, if you operate in an industry with several different areas of operation. If you do, you need to ensure the agent classifies your business properly. They are in the business of analyzing risk. If you do not tell them all of your risks, then it is in their best interest to assume your business is taking on more risk. If you do not give your agent enough information they may place your business in a riskier classification code. This can have an enormous impact on what you pay for general liability and workers compensation insurance. Taking just a few extra minutes to explain exactly what your business does and does not do, can save you immensely when it comes to premium.
Does my business need Cyber Coverage.
Anyone that hosts a website that interacts with the public at large is a candidate for cyber liability insurance. If you conduct even a portion of your business online or ask customers to trust you or a third-party vendor with their information, you should seriously consider purchasing cyber insurance. The risk may be small that you ever incur a breach, but when a breach does occur many business never survive without this coverage.