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Good risk and insurance management is achieved through organization and planning. A lifetime of work and dreams can be lost in a few minutes if your insurance program does not include certain elements. To ensure you are adequately covered, take these steps:

  • Recognize the various ways you can suffer loss.
  • Follow the guides for buying insurance economically.
  • Organize your insurance management program.
  • Get professional advice.

Recognize the Risks

The first step toward good protection is to recognize the risks you face. Some businesses will need coverages not mentioned in the checklist. For example, if you use costly professional tools or equipment in your business, you may need special insurance covering loss or damage to the equipment or business interruption resulting from not being able to use the equipment.

Study Insurance Costs

Before you purchase insurance, investigate the methods by which you can reduce the costs of your coverage. Be sure to cover the following points:

  • Decide what perils to insure against and how much loss you might suffer from each.
  • Cover your largest loss exposure first.
  • Use as high a deductible as you can afford.
  • Avoid duplication of insurance.
  • Buy in as large a unit as possible. Many of the package policies are suitable for the types of small businesses they are designed to serve and often are the only way a small business can get adequate protection.
  • Review your insurance program periodically to ensure that your coverage is adequate and your premiums are as low as possible yet consistent with sound protection.

Have a Risk Management Plan

To manage your insurance program for good coverage at the lowest possible cost, you will need a definite plan that undergirds the objectives of your business. Here are some suggestions for good risk and insurance management:

  • Write down a clear statement of what you expect insurance to do for your firm.
  • Select only one agent to handle your insurance. Having more than one may complicate and weaken responsibility.
  • If an employer or partner is going to be responsible for your insurance program, be sure he or she understands the responsibility.
  • Do everything possible to prevent losses and to keep those that do occur as low as possible.
  • Don't withhold important information about your business and its exposure to loss from your insurance agent. Treat your agent as a professional helper.
  • Don't try to save money by underinsuring or by not covering some perils that could cause loss, even though you think the probability of that loss's occurring is very small. If it is small, the premiums also will be small.
  • Keep losses better coverage at lower costs in the future.
  • Have your property appraised periodically by independent appraisers. This informs you of your exposures, and allows you to prove more conclusively what your actual losses are if any occur.

Get Professional Advice

Insurance is a complex and detailed subject. A qualified agent, broker or consultant can explain the options, recommend the right coverage and help you avoid financial loss.

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This article is reprinted by permission of the SBA and The Travelers, Hartford, Connecticut.
For more information on SBA programs go to www.sba.gov


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