How important is it to review your insurance annually?
Jerry Mclemore and his small construction company is a perfect example of why it is essential to review your insurance coverage and classifications. Mr. Mclemore suspected that he was possibly being overcharged and misclassified on his general liability policy. He decided to have Henkes Welsh review all of his insurance coverage. Upon review, Henkes Welsh discovered that the construction company did not have the correct classification. The insurance agency revised the companies class code and saved Mr. Mclemore thousands of dollars. They also fixed prior year audits and received thousands more in return premium on top of saving thousands.
Mclemore’s experience is a perfect example of why companies should review their business insurance programs annually. If insurance was purchased with an error, it could carry on for years if unexamined, which will leave them exposed to undetected risks costing companies additional money. Even if the review were thorough the first time around, circumstances would change from year to year.
It is very easy to get complacent; some had insurance policies in place for years with the same coverage they had when they had a 500 square foot office, one computer, and a desk. Now they are up to 25 people with workstations, additional equipment, and no idea that they are underinsured.
On the flip side, it is also possible to be overinsured. For example, Henkes Welsh reviewed the insurance for a small skincare manufacturer with a large corporate contract. They were required to have a $2 million general liability policy with a $4 million excess liability policy. Upon review, they no longer had the contract with that company; therefore, they could lower their limits, saving them $7,670.
Small businesses usually start with basic insurance coverage, consisting of general liability and commercial property policies, also known as business owners policies. As a company grows, it is essential to review all coverages to avoid overlooked insurance coverage gaps.
Some of these coverages are as follows:
- Employment Practices Liability Insurance – Coverage for HR issues such as harassment, discrimination, and wrongful termination.
- Umbrella/Excess Liability Insurance – Coverage for claims that exceed the standard insurance policy limits.
- Hired/Non-Owned Auto Insurance – Coverage to protect a company if employees cause an accident while driving a rented or personal vehicle.
- Professional Liability Insurance – Coverage for professionals that make an error or omit information that causes a lawsuit. Professional liability typically pays for fees of defense attorneys.
- Workers’ Compensation Insurance – Most states require that a company has coverage for employees that may get hurt on the job. It provides payment for lost wages and medical expenses on behalf of the injured employee.
An annual insurance review is essential.
A company needs to ask their insurance agent if they need any of the above insurance policies or if their insurance agent believes there are gaps in coverage. Also, make sure to consider the following:
- Location – Did you move, add locations? General Liability or business owners policy could change depending on the building's location, square foot, if it is sprinklered, and what the class of building you have acquired.
- Business Property – Did you purchase or eliminate equipment, computers, furniture, or other property? You may need to increase or decrease your business property limits.
- Revenue – Did your company’s gross sales increase or decrease? Remember, as you grow, the greater the potential liability you face.
- Employees – Did your workforce increase or decrease, do you have a high turnover, do you use independent contractors? If you have a high turnover rate, consider purchasing an employment practices liability policy just in case of a wrongful termination suit.
- Services – Did you add a new type of service, or have you changed your services? If you have, you may need to add endorsements to your general liability policy to cover the service you offer, or you may need to find another insurance company that provides the coverage for the type of service you offer.
- Customers – Did you add a new industry or change your customer base. If you have professional coverage, your current insurance company may non-renew your coverage if you concentrate on servicing higher risk industries.
Above are reasons it is essential to review your insurance coverage every year. Having the proper insurance coverage for your business mitigates the possibility of a significant claim that is not covered by insurance. Start now, call Henkes Welsh Insurance Agency for an annual review. https://www.isuhw.com