Cut the cost of your insurance premiums

When was the last time you took a look--a very close look--at your business-insurance program? If it's been more than a year, you may be missing out on chances to save money. Now is a good time to round up all of your policies and see if you can cut some of your costs.

Here are several guidelines that may pay handsome dividends. A few dollars here, a few dollars there--it can add up quickly to something significant.

Set priorities. Figure out what coverage is essential and what coverage is non-essential. Rarely can a business afford full coverage. Therefore, start by looking at what coverage state laws may require you to have. For example, your state may require minimum coverage on business-related cars and trucks. Insurance companies usually require policy holders to carry workers'-compensation insurance if they have employees. Beyond the required coverages, think about these questions: What types of property losses would threaten the life of your business? What kinds of liability lawsuits might wipe you out? Use insurance to avert disaster but not routine losses.

Increase the amount of your deductibles. The difference between a $250 deductible and a $500 deductible, or between a $500 and a $1,000 deductible, may be considerable--particularly if you add up these premium savings for a 5- or 10-year period.

Start a program to control property losses. Although we hear about fires destroying homes and business all the time, a fire is one of those things about which people say, "It won't happen to me." The truth is you could find your equipment-storage garage in flames because of a simple gasoline leak. Therefore, it is best to take precautions to prevent property losses whenever possible. The following measures may lead to lower rates for your fire insurance: * Install a fire-alarm system * Put fire-resistant walls in high-risk areas * Isolate and safely store flammable chemicals * Add a sprinkler system * Provide additional fire extinguishers.

Initiate a loss-prevention program. Vandalism can be a problem on golf courses, office parks or recreational areas. Here are some ideas: * Install tamper-proof locks * Purchase a secure safe * Install an alarm system * Install motion-detector lights * Secure outdoor furniture (either chain or concrete) * Hire a security service to patrol your property at night.

Reduce risks to customers and employees. Your insurance company may be able to help you with loss-prevention and risk-reduction techniques. The steps outlined below will reduce your losses and, in turn, lower your insurance rates. Here's a tip: In the short term, simply put these practices into effect. Notifying your insurance company about them may put you in a lower premium category.

Consider doing some or all of the following: * Provide additional training for your drivers * Avoid hiring drivers with poor records * Set up a system for safe operation of machinery * Conduct fire drills * Provide your employees with protective clothing and goggles.

Reduce workers'-compensation claims. This is one of the fastest growing--and most expensive--areas of business insurance. Post safety rules for your workers. Teach them the proper way to lift heavy objects. See that injuries are treated promptly at a nearby walk-in clinic or emergency room. Pay small first-aid claims yourself--if legally permitted in your state.

Inquire about premium savings possibilities. Specifically ask your insurance agent: "What can I do to get a better rate?" Sometimes something simple like installing deadbolt locks or buying two more fire extinguishers will qualify you for a lower premium.

Comparison shop. It is a good idea to comparison shop, but be wary of unusually low prices; there's no free lunch. If one insurance company's prices are considerably lower than the others, it may be a sign of a shaky company, or it may be that you are comparing apples with oranges. Be sure that the coverages that you are comparing are similar.

Transfer some risks to someone else. Here's an example: Mark runs a retail lawn-care store and deals primarily with goods from one manufacturer. Because Mark buys a significant amount of equipment, the manufacturer agrees to provide insurance to indemnify his business from any claim by a customer who is injured by the equipment.

Another way to transfer some risks is to lease employees. The leasing company takes care of carrying workers' compensation and liability insurance on the employees, among other things. But be cautious! The overall cost of leasing employees may be greater than if you hire directly.

Self insure. Using this technique, you would maintain a reserve fund for possible losses or liabilities. However, most small businesses and many mid-sized businesses encounter two drawbacks with this technique. First, your business may not have enough funds to set aside for this purpose. Second, unlike ordinary business expenses, money put into a reserve fund is not tax deductible until or unless you spend it.

Seek out group plans. Many of the trade associations in our industry are sources of good insurance coverage. A trade association often is able to get good insurance rates for its members because it has superior bargaining power.

Review your coverage and rates periodically. Keep track of your coverage and update your rates as necessary, but do not dump a loyal agent for a few cents. Maybe your agent can look around and meet or come close to meeting the competition.

Lock in low prices. The insurance industry is cyclical with alternating phases of low prices and high prices. If you are shopping for insurance when prices are low, try locking in a low rate by signing up for a 3-year contract.

Find a comprehensive package. Look for a small-business package that includes a full range of coverage. This often is much cheaper than buying piecemeal coverage from several different companies.

Learn the rules for making claims. If your insurance policy has time limits and other technical rules for making claims, you need to be aware of these. Otherwise, you may find yourself unable to collect on a legitimate loss.

Fred S. Steingold practices law in Ann Arbor, Mich.

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