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.