It’s late in the fourth quarter, which means the end of the calendar year is in sight and, if you’re like most small businesses, you’re rounding the final turn of your fiscal year too. The next few weeks might be “the most wonderful time of the year” but it might also be the most frenzied.1 If this is your busy season, you’re trying to crush it and finish strong. If Q4 is your slower season or you’re not seasonal at all, gliding to the finish is probably not an option either. Regardless of the flow of your business, this is a time to build momentum and plan for next year, to take stock and set yourself up for success. Among those things you should review right around now is your small business insurance. Your company, the business environment in which you operate, and the insurance industry have all been changing around you while you’ve been heads-down executing. Time to take a fresh look – call it an insurance health checkup for your small business – and ensure your business is optimally protected and you’re not leaving money on the table.
The full list of things that can affect your coverage profile is far too long to describe in this post. Below are five examples of places where you and your broker can look, both obvious and not so obvious, to optimize your business insurance as you approach 2019.
- Your stuff. Let’s start with a coverage area most small businesses are familiar with: commercial property insurance. A rule of thumb is as your revenue and payroll go, so goes your property. Are your revenues and/or payroll different than last year at this time? If so, there’s a very good chance the value and nature of your business property have also changed. Aligning your insurance with the current value of your property is the only way to ensure you can recover and replace it with little to no disruption to your operations.
Another consideration is to make adjustments to your commercial property insurance policy that were overlooked earlier in the year when you made equipment and other assets purchases. Without disclosing the name of the client, one of our brokers recently shared a story of a small professional services firm that recently outfitted its staff with some very expensive, souped-up cell phones as part of its smart office platform. It also insourced its data network over the summer, installing servers, switches and backup equipment. Finally, it hired three new professionals and bought all the necessary gear they need to do their jobs. All of these actions occurred without increasing the value of the property covered in its current commercial property insurance policy. There’s a fast and easy remedy to these oversites, and this is the right time of year to inquire about it.
- Your people. The aforementioned firm added staff and payroll last year. Did you? Did you increase salaries and wages, create jobs or change the nature of existing jobs? If you’re a business that has employees, the answer to at least one of these questions is probably yes. Workers’ comp insurance, a requirement in 49 states, must be evaluated each year based on the size of your payroll, the nature of your jobs and your company’s experience. If you’re a business without employees but nearing a point where hiring someone makes sense, or you use contract labor, a conversation with your insurance broker about your current and prospective exposures is highly recommended.
Workers’ comp can also be tricky based on what state your business is domiciled in, as well as the state(s) in which your workers are located. For example, if you’re based in New York and use a contracted consultant in another state, say Pennsylvania, there are a number of factors that can increase both your financial and legal risk. In this example, if you hire a Pennsylvania-based 1099 contractor who has neglected to secure their own workers’ comp coverage, you may be forced to pay for their exposure, an unwelcome surprise that will be discovered during your year-end workers’ comp audit. Bottom line? Understand your total workers’ comp exposures and ensure your insurance is fully compliant and protective of your business.
- Your Evolution. You’re a businessperson and an entrepreneur. You’re never satisfied, and you have an innate need to grow, to leverage your skills and find new ways to compete. Perhaps your plan was to start your business by executing one set of activities, such as R&D and prototyping, and naturally progress to the next obvious thing, like manufacturing the products you’re developing. As you transition, you are more than likely going to need different types of coverages. As an R&D shop, a general liability policy protecting your business against any number of unfortunate accidents and mishaps might be adequate. But now that you’re actually making things, a product liability policy – extremely important coverage that protects you against claims of personal injury or property damage caused by your products – comes into play.
Another example of how business evolution creates new exposures is that of a lawn service that has been providing weekly yard maintenance but starts offering landscaping design advice to its clients, perhaps by casually fulfilling a request of a long-time client. A professional liability policy, otherwise known as errors and omissions (E&O), is now necessary to protect the business when something goes wrong, and against the client who accuses it of misrepresentation or negligence. A business can evolve in many ways during the course of a single year. An annual insurance health checkup is a great way to recognize how your insurance needs have changed.
- Your Benefits. Let’s get back to your people. If you have employees you may be offering them benefits, such as health, disability and other insurances, retirement plans and various additional benefits that help your employees and their families be healthy and happy. If you’re new to it or if you’ve added new benefits offerings, annual enrollment can be complicated, and communicating accurately and exhaustively to your employees is, well, as much art as it is science. If employees aren’t fully informed when making their elections, you could be exposed to benefits liability. An EBLI (employee benefits liability insurance) endorsement can protect you from the cost of paying an employee for the value of the benefits they claim they didn’t know about (there’s a very good reason why elaborate benefits information sessions have become commonplace and why employees are asked to sign declination of benefits forms).
Also, labor laws change and, honestly, who among us makes staying current with labor legislation a priority? In your state, a benefit that was once optional, such as paid family leave, may have become a requirement without your knowledge. This creates exposure. Even if you’re doing all the right things, staying compliant is a moving target and this is the right time of year to discover, learn and adjust.
- The Carriers. Speaking of changes, guess who else is always making them? Insurance companies, that’s who. Insurance carriers operate in a highly competitive industry, always flexing their risk tolerances, offerings and, best yet, their prices. Carrier A may have historically not offered a particular kind of small business coverage (or any for that matter), but recently introduced it, and aggressively. Carrier B, who has always offered said insurance, now reacts by liberalizing their exclusions and lowering rates. In other words, every year brings new opportunities for you to improve your coverages and save money! Since most of you aren’t in the small business property and casualty industry and don’t track these machinations, you can do yourself only favors by annually working with your broker to review recent insurance market changes and find value for your business.
Like seeing your doctor once a year to check your personal health, you and your insurance broker should look at your business’s insurance health. The last sprint to the end of the year is the best time to have this conversation. January comes quickly and then the race begins again. Make sure you’re set up for success by heading into the new year confident that your business insurance is fully optimized, accurately reflecting all aspects of the business you’re running today. Then do what you do best, execute.
1It’s the Most Wonderful Time of the Year, music and lyrics by George Wyle and Eddie Pola.
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