The types of coverage and policies are vast and confusing. Buying the best combination of features and benefits is easy if you ask the right questions and follow these simple rules. You need to think in terms of risk management.
Dansearch & Company
(212) 288-8510
400 East 77th Street
New York, NY
Niagara National, Inc.
716-684-6000
AppleTree Business Park
Buffalo, NY
FinancialJobBoard.com
212-545-3741
PO Box 2209
New York, NY
Niagara Insurance Group
(716) 633-3770
5225 Sheridan Drive
Williamsville, NY
ECapital-Financing
716 984-5303
P.O. Box 1042
West Sencea, NY
Johnstone & Mulberry, Inc.
845-838-3908
PO Box 1539
Wappingers Falls, NY
Cool Insuring Agency, Inc.
800 233 0115
784 Troy Schenectady Road
Latham, NY
BUSINESS SERVICES
1-800-844-2951
266 ELMWOOD AVE
BUFFALO, NY
Revolutionary Capital Corp.
212-785-2497
67 Wall St. 22nd Fl. Corp Headquarters
New York, NY
NY Preferred Brokerage
518-641-0321
24 Madison Avenue Extension
Albany, NY
The types of coverage and policies are vast and confusing. Buying the best combination of features and benefits is easy if you ask the right questions and follow these simple rules. You need to think in terms of risk management.
1.It may seem obvious but you have to start with an accurate value of your business. You don’t need to hire a business valuation expert necessarily but you need to follow a formal valuation to know before you start shopping for insurance what the real market value is. Your business is not just the value of your assets, but the cash flow it generates, your income that is provides.
The little hidden secret in the insurance agency world
2. The insurance business has hundreds of companies competing for your business but NOT ALL of them are competitive for your business needs at the same time. Typically carriers changes their pricing based on their market share needs, sometimes they want to grow their market share (competitive pricing), and some times they don’t (not competitive or not even providing coverage for businesses like yours).
You need to have the ability to know which companies are competitive when you are buying. If you don’t have a way to know you can easily pay 10-30% more than you should. How to know is the million dollar little hidden secret.
Captive agencies (Allstate, State Farm, Nationwide, etc) sell their companies products (with occasional brokerage capability outside their company). Therefore if their company is not buying market share when you are shopping, they will not be competitive.
Independent agents (the local small offices in your town) sometimes have full brokerage, but usually only typically work with 2-3 primary carriers. The reason is simple. They only can do so much business, and need to “funnel it” to a few key companies to allow them to keep those companies agency contracts.
It’s usually best to work with an independent agency that is part of a national network of agencies that have full brokerage capability and is actively using multiple carriers consistently. It is not easy to know, as those who aren’t wont’ tell you or they will say they are but really are primarily selling 2-3 companies for 90% of their business. So be alert, ask questions, and verify they have access to a nationwide network. This will increase your chances of getting competitive pricing all the time as carriers move in and out of the market.
Define the liability you really face. Separate the likely from the remote
3. Once you have the valuation of our business you can then define your liability coverage needs. Liability is often overlooked but can mean devastation if your sued and do not have adequate coverage, or the right features. General liability is usually featured as part of a general Business Owners Policy. You need to know what the liability coverage limits are, and what is not covered. For example Directors, and Officers liability covers suits against the organization for management mistakes, employment practices liability covers damages from violating am employees rights, Errors and omissions protects you from failing to perform your services properly.
Independent contractors you hire to work on your property can be a liability to you if they screw up. The key thing you need to know here is what amount is appropriate, for what type of liability, based on the type of business and services you officer. A landlord has many potential liability issues. Usually an umbrella policy that covers you beyond the general liability of the Business policy is also a low cost valuable added feature. Know your liabilities.
Focus on special equipment and activities of your employees
4. Know what special equipment, vehicles you have that need special treatment. Employees driving their own personal autos on business related trips need to be covered for example. Materials, in transit, equipment on location, inventory, all need special consideration. List these items before you shop for insurance and know your getting the coverage to meet those items, let the agent you’re working with know.
Business interruption can mean business destruction
5. If your business relies on property location to generate income and the location is damaged and the income stops, so does your business. Property coverage does not cover income and extra expense coverage. Recognize that income from a location will stop if that location cannot produce income due to damage. Sometimes known as business interruption insurance this is something you need to know before you buy coverage for your property.
The devil is in the details. Never more true
6. Know what events are covered and which are not. It may again seem like a simple thing, common sense thing, but not all events are covered under the typical Business owner’s policy. For example, not covered items can be employee dishonesty, floods, burglary, newly acquired property, money and securities, valuable papers records and electronic media, computer fraud, EFT transfer fraud, etc
People. Don’t overlook their effect on your bottom line
7. Don’t forget to insure your key people, those who are most important to the continuation of the business. This is not a property casualty item directly, but human resources, human capital really should be part of the property casualty discussion. Loss of a key person can be as devastating as loss of a building or primary hard asset. Define the key people in your business, and who are they, they are not necessarily only the owners or executives.
Seek help from an objective source
In conclusion, you can’t be expected to know all of this yourself, you need expert professional advice. You need to start with the obvious, what is the value of the business, and what are the liabilities most likely that need to be covered.
A review of the types of assets and equipment you use and own, as well as knowing what events are covered and which are not, in a formal process, BEFORE you buy insurance will keep you on the right track. Make sure you are dealing with an insurance professional that has full brokerage access to multiple carriers to insure you are buying coverage from a carrier that is in the market buying market share and has competitive prices. Each year annually you need to explore the marketplace again as the marketplace will change as companies get in and out of the market.
Finally, be aware of the financial strength of any carriers you consider. Always use high quality companies.
1. Have an accurate valuation of your business
2. Learn what companies are in the market buying market share ( it changes over time)
3. Define the types of liability your business faces and prioritize which are most likely
4. Be aware of special equipment you use and any auto related business your employees make.
5. Realize business income reliant upon a specific location stops if damaged or destroyed.
It’s not enough to insure the property, insure the income too.
6. Know what events are covered and which are not. Be clear what you’re insuring.
7. Don’t forget to protect your business from the loss of all “key people”.
Know your business value, define the risks, and set priorities
Employ a priority based risk management planning process to your business. Just like larger public companies, your risks are evolving as your business evolves. Quoting insurance on an item by item basis without a formal process that prioritizes your needs is only suitable for the smallest of businesses.
A priority measuring system that allows you to receive competitive pricing year after year will not only save you money but will deliver the right mix of coverage on the risks that are most important to the success of your business when an unexpected event occurs. Whether formally or informally you are prioritizing your goals every day, its how every business makes decisions. The risk management process is exactly the same. The challenge is in knowing what risks you have, prioritizing them in order of importance, and then determining what mixture of insurance and self insurance is best for your business.
With our clients we employ a planning system we call the priority risk metric system. It is really an outgrowth of these 7 things. It allows our clients to follow a formal process every year to keep them on track.
Brent Eugenides is a comprehensive financial advisor specializing in risk management for private business owners. He is a seasoned professional and member of the FPA, Financial Planning Association. Brent has Mortgage Banking, life insurance, property casualty / business insurance, and financial planning experience spanning over 25 years.
Having been part of a family owned business he knows first hand the issues smaller firms face.
1978 – B.S. Business - Finance, University of South Carolina
1979 – Mortgage Banking – NYU Stern School of Business
1980-1994 – VP Fidelity National Mortgage Corp - FNMA GNMA FHA / VA Issuer, Delegated Underwriter
1995- 1997 Estate Planner - CIGNA Financial Advisors
1998-Present – Managing Partner - BE Financial LLC, insurance consulting and financial planning.
BE Financial LLC
888-755-1040
brent@befp.com
NY Preferred Brokerage518-641-0321
24 Madison Avenue Extension
Albany, NY
www.thepreferredgroup.comNY Preferred Brokerage, Inc. is committed to Group Insurance for the enhancement of Employee Benefits. We also specialize in the administration of Flexible Spending Plans, Dental Plans and Health Savings Accounts.