Just as many individuals are cutting back on home and auto insurance to save money in this time of economic crisis, many small business owners are letting their insurance policies lapse as well, and according to Loretta Worters, vice president for communications with the Insurance Information Institute, this is not an area where people should scrimp.
Worters is aware that insurance coverage may seem like an unnecessary expense just now, but she wishes to remind business owners that spring floods and tornadoes, as well as hurricane season, are coming sooner than we think. “They’re facing all these challenges today: rents are rising, financing hard to get,” she said. “Things are daunting to them, but one thing they have to think of is the whole issue of being underinsured.”
Why does this matter? Because when a business is underinsured, it increases their risk when accidents like fires and thefts occur. Underinsurance, Worters says, often happens when a business has made improvements to its building or acquired new equipment, but hasn’t bothered to adjust their policies to cover the changes.
On the other hand, she observed, with falling real estate values it might make sense for some companies to reduce coverage.
What is the uneasy small business owner to do? First, have the business and property reassessed, in case there is less value to cover. Then, shop around – there are different premiums offered by different companies. Finally, consider your homeowners insurance. Such policies often have some business insurance built in, and it is often possible to add an endorsement to insure a business, especially if you work from home.
What one kind of insurance is worth a few extra bucks? BOPs, or Business Owner’s Policies come with business interruption coverage, as well as property coverage, which former can be crucial in a smaller company’s survival.