Insurance Value – Not Price – Matters
Consider the Insurance Value
Insurance buying decisions should be made based on the potential impact to the business. Further, these decisions should be isolated, based on the balance sheet impact and those exposures where insurance is being used to manage cash flow.
The considerations, in order of priority, should be as follows:
- What is the potential balance sheet impact from an adverse event?
- What are the cash requirements?
- What is the cost of insurance?
Some of the important related issues are: customer continuity; the organisation’s cost of capital and if the insurance protection being obtained is relative to the cost. If the cost of insurance is too great relative to the risks being transferred, then why buy it?
Questions to consider are – what is your company doing to help receive value for your money with the insurance premium it is paying? Are you undertaking a detailed review of your business? Are you making sufficient enquiries about the aspects of loss prevention? Are you receiving sound advice from an insurance professional to ensure your business and family are adequately covered?
The key to focus on is value, not price, when dealing with insurance. Manage cost by rethinking what are real risks, the demand for certain insurance products available and the value received.
There are a couple of things that you can do if you are unsure whether or not your business is properly insured. If you are one of those people that simply pays your premium when you get your renewal in the mail and files the documents away in the ‘too hard basket’, we suggest if anything, read the number which signifies the amount of coverage for the business itself. Does it seem like it’s enough coverage? That limit is significant and is crucial to the rest of the coverage. If it doesn’t seem right, it’s probably not and you could be under-insured for everything else as well. Why would you want to pay premium (that might be cheap) on coverage that isn’t accurate?
Paying for insurance is inevitable, so you should make sure you at least know that you are covered properly. There are a lot of things in life that we can get away with ‘being cheap’ about: your business coverage should not be one of them (unless of course you like to be stressed and financially strapped during a sudden loss or event). If when shopping around you find significant savings in rates, consider if it is coming at a cost or in other forms. Be assured, you are likely not to realise until it’s too late.