Ways to Save on Commercial Insurance for a Small Business

By on January 6, 2017

Every business owner can use a little extra savings on their commercial insurance policies. Taking the time to review your policies can sometimes bring to light opportunities for reducing costs. The right coverage and a well thought out risk prevention plan can save you money in the long run; it may even save your business from going under.

Work with your trusted commercial insurance broker to ensure you are taking these five steps to lower your business’ insurance costs.

#1 – Review ALL of Your Policy Coverages

Organization is the first step in reducing insurance premiums. Start your review by looking at your insurance file. If you don’t have a file, now, is a good time to start one. Make sure that you have copies of all policies in your file and readily accessible when needed. Make sure there are copies of claims forms for each policy in the file. You will want to create a separate off-site location for a copy of your policies and forms in case this file is destroyed.

Read each of your policies carefully as payroll or certain aspects of your operations may have changed; it may mean you need to add new coverages and drop old ones. If you are paying for coverage you no longer need then eliminating that portion of the policy could result in an instant reduction in premiums.

#2 – Consider a Workers Compensation Audit

3 out of 4 businesses are being overcharged 5 to 15% on their Workers Compensation Premiums due to errors and claim calculations. It is highly likely that your insurance broker has a service to audit the classification of your employees, past date claims and any other errors which could be affecting your Xmod rating. In addition, they may offer training for employees/management to reduce risky habits which could be driving up your premiums from minor claims.

Ask your agent/broker to review your policy and claim data going back several years to find errors that will result in premium refunds. Here are a few of the places they are likely to find you savings:

  • Errors and Omissions: There are often improperly stated claims, clerical errors, a change in the severity of a claim and even claims belonging to similarly named businesses that can impact your records and Xmod ratings.
  • Audit Payroll: To make certain your company is coded appropriately to correspond with your specific industry and operation, including available exclusions and individual job classifications. A difference between actual and expected payroll reports may inflate your Xmod rating.
  • Review Loss Runs: Go back three years or more, to analyze the frequency and severity of past claims, ensure each claim is closed properly, then recalculate and resubmit all the numbers.
  • Confirm Insurer Reserves: Review the level of reserve funds your insurance company holds to cover outstanding claims, as they can raise your xmod and premium rates, regardless if the funds are used or not.
  • Subrogation Recovery: It can take years to report and recover losses when a third-party is responsible for an injury or claim. Failure to identify potential subrogation is a missed opportunity to recover claims costs that directly impacts premium rates.

#3 – Review Your Named Insured and Key Employee Policies

This step involves reviewing named drivers and/or key employees identified on policies to make sure these people are still with your company. Many employers simply fail to adjust their named insured endorsements when employees leave or adding new employees to their policies despite their added responsibilities (and relative liability risk). You may be able to get significant savings if the loss or addition of the employee results in lower risk.

#4 – Save on Health Insurance

Although it was delayed a year, the employer mandate in the Patient Protection and Affordable Care Act (ACA) took effect on Jan. 1, 2015. Medium to large-sized businesses with 50 or more full-time-equivalent employees (FTEs) will be forced to pay a penalty if they do not provide minimum essential health insurance coverage for employees.

The drawbacks of paying the penalty rather than providing insurance include:

  • Refusing to make an investment in employees could lead to resentment in the workplace. Associated consequences could include reduced productivity and retention problems.
  • Not providing coverage may hurt a company’s chances to recruit potential quality employees who view employer-provided health insurance as an important benefit.
  • Customers may take a negative view of companies that do not provide health insurance to employees. This could particularly be a concern if a company’s competitors or peers provide coverage, so it may be important for management to consider whether competitors choose to pay the penalty or provide health insurance.

Small businesses with 25 or fewer employees and average annual wages of less than $50,000 should determine if they are eligible to claim the credit of up to 50% of nonelective contributions they make on behalf of their employees for insurance premiums. Although it could cost you to start up a group policy for your team, you stand to earn back that investment through the credit and fewer sick days.

#5 – Employee Training and Safety

Training your employees to perform their job effectively and operate equipment safely has the added benefit of reducing premiums (particularly for workers compensation). Proper training prevents accidents or injuries, which not only affects insurance premiums but the extra time and resources necessary to replace an injured worker.

Implement a written safety program so every employee is accountable to standards which can reduce your costs. Insurers will offer substantial discounts for a trained workforce. For example, liquor liability premiums can be cut by 15-20% if servers are required to attend alcohol awareness training. Find out what training will reduce rates and get your employees involved.

Work Closely with Your Insurance Agent or Broker

Your insurance professional can provide invaluable advice to help save you money and protect your business from unexpected disasters. The longer you have been with your insurance company the more likely you are to qualify for better rates or policy discounts. Your broker will work with carriers to reduce your premiums.

In order to receive the most savings and full protections, you need to keep them informed about any major changes in your business. This includes major purchases, expansions or changes in hiring or the nature of your operation.

You may be able to reduce your premium for certain coverages by following your insurer’s recommendations for reducing risk, such as work-related accidents, or setting for procedures that should be in place in case your business does suffer a major catastrophe. These can include workplace safety, disaster preparation, and human resource intervention.

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About Scott Ho

FSN insurance and retirement journalist - Planning for your retirement or understanding your insurance needs can be confusing and difficulty. Scott knows these tasks can seem daunting. He offers his experience to make choosing insurance coverage and planning for your golden years a successful endeavor. Connect with Scott at !

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