The Purpose of Commercial Risk Insurance

To manage risk, all businesses need commercial risk insurance. Without this safeguard, businesses are at significant risk and can even face financial ruin without the protection that insurance affords. “Risk management is critical for every business, and being prepared for risk–whether from a force of nature, new government regulations, or something else–can be the difference between success and failure (2).” Understanding the ins and outs of commercial risk insurance is essential for any business that wants to protect itself against unforeseen risks.

Overview of Commercial Risk Insurance

Depending on the nature of a business, a company or organization must procure insurance as required by the law. Yet often the minimum insurance isn’t enough to offer all the protection a business truly needs. Businesses face all kinds of risks. Storms can wreak havoc on physical property like buildings and even servers. Sensitive information might be stolen resulting in an expensive law suit. Risks can’t often be foreseen, so having insurance policies in place that protect the business once events come to pass is the only reliable solution for a responsible business.

Of course, there are many commercial risk insurance plans. Policies can be tailored to meet a business’s specific needs. In some cases, a business needs to heavily protect its physical properties (1). In other cases, a business might need to protect against liabilities associated with its industry. For instance, employees might face certain on-the-job risks. A commercial insurance provider or insurance advisor can assist organizations as they try to determine the nature and level of insurance they need to go forward.

Types of Coverage Packages

Businesses should consider all different types of insurance packages and coverage. While your insurance provider will be able to go over each specific types of coverage, generally businesses must examine policies for professional liability, commercial property, insurance for directors and officers, media liability, cyber liability, workers compensation, fiduciary responsibility, and specialized policies designed for specific business features. Not every business needs all these types of insurance; however, your expert insurance advisor can help you decide which you need based on the types of risk your business faces.

Insurance as an Essential Investment

Businesses face substantial risk by failing to carry commercial risk insurance or carrying too little insurance coverage. Carrying insurance is a business expense that cannot be ignored. New or small businesses may not always understand the risks that face or how much insurance they should carry. An advisor can even help you determine if you need interrupted business insurance. If something happens to your business–a fire, for instance–you can be compensated for lost profits.

To obtain the commercial insurance your business needs, it’s important to work with a provider that can give you the expert insight you need to make the best insurance decisions for your business. Many businesses choose to work with a single insurance provider so they can obtain discounts on the policies they procure. Be sure to investigate the ins and outs of each policy so you understand the nature of the coverage you obtain.

Sources:

1. N. Madison “What is Commercial Insurance” Wisegeek.org, http://www.wisegeek.org/what-is-commercial-insurance.htm.

2. “Commercial Risk Insurance,” BayPoint Benefits, http://baypointbenefits.com/index.php/solutions/commercial-risk-insurance.

Risk Management and Your Commercial Insurance Policy

Looking for a way to save on your business insurance policy? Commercial institutions that are proactive about risk management face less exposure risks in terms of losses, damages and the liability for them. Moreover, insurance companies are more prone to offer savings and discounts to those companies and non-profits that are involved in risk control.

Before implementing risk control, however, it is extremely important to know the basic risk-management principles that include the following:

1. Never risk anything more than you can afford to lay bare. In the event a given loss would cripple your company, don’t accept the risk. Rather, transfer that risk to someone else.

2. Never risk too much for an excessively low return. To understand the point, here’s an example: by accepting a higher level of deductible on your auto insurance coverage, you may receive only minimal premium savings.

3. Understand the odds of a loss. If the potential for a given loss seems remote, it stands to reason that you may be able to address the exposure a different way than if the potential is more common.

In short, it is necessary for you to comprehend how much money, time and equipment is actually at risk. Only then can you determine if you can afford to assume the risk of losses yourself or transfer it to somebody else. And then you must make it a priority to understand where frequent or serious losses are more apt to come from – and address them accordingly.

Once you have understood this, choose form these four risk management methods:

• Eliminate the exposure. Stopping the sale or distribution of alcoholic beverages in your social hall is an easy way to eliminate your liquor law liability exposure.

• Take on the risk yourself. Insurance deductibles are the perfect example of assuming risk. If you don’t believe you will have a frequency of losses or if your company has enough financial backup, you may wish to assume a larger deductible – like $1,000 or $2,500 as opposed to a $250 deductible.

• Reduce your exposure to risk. You can do this, for example, by using a spotter whenever possible. This will not eliminate the chances of an accident. However, it will reduce the likelihood.

• Transfer risks. If a risk exposure cannot be reduced or eliminated and assuming it is too risky, then you should transfer the exposure to a 3rd party. While it’s true that insurance is the most common method of transfer of risk, it is by no means the only one. A different method that is commonly used is a hold-harmless agreement or an indemnification clause found in a contract.

To understand more on the topic, contact an experienced independent insurance agency that deals with the leading companies in the industry.