The executive director of BIBA explains why insurance brokers can be viable options for micro businesses, and the importance of seeking a balance between the appropriate level of cover and value for money.
It is probably easy for owners of very small businesses, whether new startups or more established outfits to think that buying their commercial insurance will be just as simple as buying their home or car cover. But, even for the smallest of businesses, the different insurance covers that might be needed to ensure the business is fully protected can amount to a complex portfolio of policies.
According to BIBA research of 500 owners of businesses, those with fewer than 250 employees work over 13 hours more than the usual 35 hour working week, so it’s no wonder that most simply do not have enough time to check whether the insurance they’ve bought is right for what their business is or what it does. In fact, 29 per cent of those surveyed had never read their commercial insurance policies at all.
What does this matter to the time-poor small entrepreneur? I believe it makes a great deal of difference. If you simply wait until there is a claim to test the adequacy of your cover and find that what you’ve bought just isn’t sufficient then it could spell disaster for your business. We know that business owners are busy people and sorting out insurance can stay right at the bottom of the list for many.
Even more off-putting is having to establish exactly what your insurance needs are. Plenty of insurance providers will package up basic covers into a bundle creating a simple policy appropriate to particular trades or sectors. However, because every business is different, will a simple package suit your specific needs?
Do you know?
- What cover you are legally required to have – motor insurance and, employers’ liability
- What cover is essential to your business, for example, public liability, product liability, goods in transit, property damage, business interruption or others
- What risks are actually facing your business, such as supplier failure, and how they can be mitigated
- Which additional covers you should consider for example, professional indemnity, environmental liability or travel insurance?
Of course when selecting your insurance you will want get the right balance between the appropriate level of cover and value for money. That is why you should consider getting advice from an expert. An insurance broker will be able to advise you on your particular business insurance needs and get cover at the right price. They can help you work out what limit of indemnity you need for your liability cover based on what risk of your business operation causing injury or damage to other parties is.
They will help you to assess the correct sum insured for your buildings or contents to insure them against damage caused by fire, storm, flood or theft and other causes. If you would be unable to trade for a while after major damage covered by your insurance, a broker can help work out the sum insured you need under your business interruption policy to cover your loss of profit or revenue and over what period the cover should operate.
Once the level and extent of cover is agreed your insurance broker can use their access to a wide range of insurance companies and products to get the most appropriate policy or policies at an affordable price. It doesn’t end there. They can also continue to give advice, represent your business during any claim process and provide risk management advice to help you avoid the disruption to your business that a claim might cause. You may believe it’s easier to handle all your arrangements yourself but it’s worth considering a broker as an alternative. It could save you time and money while as a business owner, you have more free time to get on with running your firm secure in the knowledge you are fully covered.
Graeme Trudgill is the executive director of the British Insurance Brokers’ Association (BIBA).
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