9 ways to keep your business insurance costs in check in 2019

Having adequate short-term business insurance in place can be a game-changer for SMMEs to weather any unexpected financial storms… but how do you keep these costs in check?

To adequately protect yourself and your company financially for the year ahead, you must accurately assess the risks your business faces and choose your insurance cover accordingly. While many types of business insurance policies offer a broad spectrum of insurance protection ranging from equipment, property and buildings, to business assets, liability and business interruption insurance, your business may require more than one – or a combination of policies – to suit your company’s needs.

Like all insurance, the cost of your policy will be determined by the risk versus the likelihood and the potential severity of any incurred loss. Your premium will be based on the nature of your business, the industry in which you operate, the services you offer as well as which products you handle. While there are many factors that affect the costs of your business insurance, there are just as many precautions and risk improvement measures that can be taken to reduce the cost.

Below are 9 tips to follow to ensure your business insurance policy works for you, at a price you can afford too.

Imagine insurance isn’t there… and act accordingly

This is the best advice you will ever be given when it comes to insurance. It can only help if you actively implement risk management measures to reduce any potential impact if a loss occurs. Things like adding an armed response alarm system, implementing better stock control measuresand servicing fire extinguishers regularly are all good steps to take. Thinking like you are not insured makes you more risk aware and encourages risk mitigation processes and measures. Insurers will recognise these measures and often discount your premium.

Consider going out of business

Cover these risks adequately and don’t skimp. The cost of insuring against your business burning to the ground is generally cheaper that insuring your laptop.

Consider the true costs of time and replacement value

Expensive equipment can not only be costly to fix or replace, it can also take time for a new part to arrive and this can negatively impact your workflow and, consequently, your cashflow. Ensure that enough Loss of Profits cover forms part of your policy. Factor in adequate Indemnity and realistic time periods which will be required to get your business back to full operational level. Also make sure that the real replacement costs of equipment in present day value are correct.

Ensure that enough Loss of Profits cover forms part of your policy. Factor in adequate Indemnity and realistic time periods which will be required to get your business back to full operational level.

Generally, don’t sweat the small stuff

Keep in mind that items like cellphones, for example, are very costly to insure because they have a high frequency of loss, which essentially pushes up your premium.

Implement thorough internal controls to reduce and manage potential loss

This should include making employees accountable and aware of their responsibility to your company. Stringent stock controls, good vehicle maintenance programs, strong cash management control, sound quality controls and so on. These control measures will all contribute to good risk management. Businesses with sound controls and good risk management attract better rating and less punitive measure on their policies.

Keep in mind that items like cellphones, for example, are very costly to insure because they have a high frequency of loss, which essentially pushes up your premium.

Have higher excesses in place

This will bring premiums down quite a bit. You may find that keeping a reserve fund to cover an excess, should you need to claim, is a better system for you. Saving money each month instead of paying a premium for lower excesses can work for many businesses. This will, of course, be determined by the financial position of the business and how you manage your internal controls.

Make maintenance a priority

Insurers will often inspect the risk they are taking. Well-maintained assets that may be risks will not incur any additional improvement costs and are well-respected by insurers. Insurance companies seeing this sort of result will be more reasonable on pricing.

Listen to your insurer’s advice on improvements

Your insurer may, however, recommend some improvements. By making these improvements, your risks will be reduced and your policy cost will decrease.

Saving money each month instead of paying a premium for lower excesses can work for many businesses

Partner with your adviser

Last, but certainly not least, your adviser needs to understand your business, its financials, and what kind of a risk-taker you are. These are the factors that drive your insurance costs up or down. Keep in mind, however, that it is your responsibility to accurately value your business and provide the correct information to your adviser, in order to keep your cover consistent and cost-effective.

Taking these steps can really help to manage your business insurance costs and as your policy will be simplified, you will be covered for exactly what you need.

– Jurgen Hellweg is CEO of Western National Insurance