25 Apr Business Insurance Buyer’s Guide
By Tom Bagley, President
Anderson, Bagley and Mayo Insurance
Buying business insurance can be a frustrating experience for business owners. Part of the problem is that insurance companies and business owners speak different languages – and often have different perspectives on what is “good” and what is “bad” in business. Whether you are a business in Leominster, Fitchburg, Gardner, Westminster or the surrounding community, here are five things that need to be avoided to make your business more “ business insurance friendly.”
“Going out on your own” and starting a new business is part of the fabric of America’s entrepreneurial spirit. But for insurance companies, lack of experience is a downer. If you have work experience in a given field, some insurers will consider you for coverage, even if your company is a start-up – but be prepared to show them your resume. Other insurers will only be interested once you have a few years of business experience under your belt. It’s not impossible to get business insurance for a start-up with no prior experience, but you need to expect fewer options and higher premiums.
Insurers value stability, and to them, one sign of stability is consistent business insurance coverage. Insurers are very dismissive of businesses who buy coverage when needed, then cancel when times are slow. Or who only buy coverage when someone asks for a Certificate or a Binder. Insurers prefer stable businesses who place a value on insurance and who consistently renew their policies. Jumping in and out of insurance coverage will result in fewer interested insurance companies and higher premiums.
Variety may be the spice of life, but insurance companies prefer businesses that do one thing – and do that one thing well. Advertising “no job too big or too small” or “we do all kinds of construction” is sure to alienate insurance companies. Insurers prefer specialists over generalists, tradesmen over general contractors. Websites, advertisements, and business cards that promote “we do everything” will result in insurance companies saying “no thanks” to your request for coverage.
You may think everyone likes surprises, but insurance companies sure don’t. Insurers like boring and predictable. “You said this is what you do. We insured you based on what you said you do. And now you’re telling us that you also do what?” This is a particular problem when these questions surface after a claim has occurred. Even worse, some insurance policies have limitations (exclusions) that eliminate coverage for anything other than the business activities that are listed on the policy. Don’t surprise your insurance company. It hardly ever ends well.
Outsourcing of work has become common and is practiced by businesses large and small. But insurance companies prefer businesses that do their own work, using their own employees. Insurers feel the quality control is better and that it reduces the chance that the business will engage in some activity outside its normal course of business (see “variety” and “surprises” above). Even though there may be cost benefits to using subcontractors, it can lead to problems obtaining insurance unless you take adequate precautions to make sure your subcontractors are properly insured and that you have a good, written contract with your subcontractor that protects your business.
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