Business Library
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Choose an insurance policy |
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Choosing an insurance policy might seem a simple task: you simply assess the risk, gauge the premiums and buy the product. However buying insurance today has been compared to buying a personal pension in terms of its complexity. All insurance is measured by risk, generally the higher the risk the higher the premiums.
It is important to keep this in mind when looking for any kind of insurance. What you might think of as fairly risk-free might not show up that way on the actuarial tables.
Issues to consider:
- Try accurately to assess the risk you are insuring against. It is a surprising fact, but many companies either over-insure, so paying for cover they don't really need, or under-insure so finding themselves exposed when disaster strikes
- Take account of changing circumstances. Risk, like everything else, can change with time, as equipment ages, as the company expands into new activities, as the crime rate increases
- Always write down exactly what sort of cover you are looking for and make sure you stick to it; do not be talked into a policy that you do not need
- Consider dealing with an insurance broker but, if you do, realise that you might have to pay a commission.
- Consider buying an insurance package whereby you insure several items at once. This is almost always cheaper than buying individual items but does run the risk of involving an insurer who may not be experienced in all areas
- Insurance is offered by a myriad of financial institutions, far beyond the old specialist insurance companies. You will be spoiled for choice
Insurance is one of the big business fundamentals - some forms are compulsory others are just good business sense. All insurance costs money and it is therefore wise to devote regular time during your business schedule to reviewing your insurance cover.
Action Checklist:
- Decide whether you are going to use a broker; if so, make sure you are clear about fees and commissions. Insurance broking is regulated and you are entitled to see this sort of information
- Make sure you are presented with, or seek out, options. With competition so stiff there are good deals out there
- Ensure you have read and understood all relevant clauses in the policy document; if not, have them explained to you. Look out for excess fees and exclusion clauses. It is too late to start studying the fine print when you need to make a claim
- Make sure the sums you are quoted relate to the policy you are offered. It is not unknown for both brokers and insurers to offer deals simply to stimulate interest from buyers
- Be candid when asked about your insurance history and material information relating to your business (previous thefts and so on), the courts tend to favour insurers in disputed claims cases
This is a guide. It may be helpful for you to speak to an advisor in commercial insurance. E&OE