What to Consider During Your Business’s New Year Insurance Review

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There are probably a lot of items on your to-do list as you wrap up one year and start another. One item that should be added to your list, if it’s not already on there, is a New Year insurance review. This is a thorough review of your insurance policies and coverages.

January 1st is a popular expiration date for many insurance policies. If this is your policy’s effective date, starting a month or two in advance will keep you right on track to have your policy review completed prior to the renewal date. You will still be able to make necessary changes after renewal, but the process can be streamlined, from a paperwork and billing standpoint, by coinciding changes with the effective date of your policy.

Even if your policy does not renew on January 1st, a comprehensive review, even during mid-term, can be highly beneficial. The start of the new year is still a good time to do this, as many businesses have their fiscal years set up to run concurrently with the calendar year. This means that during the same time that budgeting for the upcoming year is being determined, a good look at the business’s insurance policies can occur.

Here are a few things to consider during your business’s New Year insurance review to ensure that you are covered correctly when going into the next coverage year:

1. Review your business inventory.
2. Review what’s covered on your current policy.
3. Review what policies are in place.
4. Review your insurance costs.
5. Review your internal policies and safety programs.

1. Review Your Business Inventory

Take a good look at your business’s inventory before you review your insurance policy. Your inventory includes things like office equipment, miscellaneous supplies, vehicles, machinery and mobile equipment, tools, etc. For insurance purposes, be sure to include the buildings the business owns. If a rental contract requires your business to carry insurance on a rented structure, include it as well.

Hopefully, you have kept a relatively accurate inventory list, and all it needs is a little updating. However, if you don’t have a property inventory on record, now is the time to make one. Once you have items listed, go through and assign a value based on the cost to replace the item with a new item of like kind and quality. You also want to add another value that is representative of the item’s actual cash value, or in other words, the new cost minus the depreciation that has been incurred.

This list will help you and your insurance agent determine how much property exposure your business has and will provide a guide for how much insurance should be purchased. Putting together an inventory like this, along with pictures where relevant, is also one of the tips to help farmers and agribusiness operators prepare for a farm and ranch annual insurance review.

2. Review What’s Covered on Your Current Policy

The next thing you will want to do is compare your property inventory with the covered items on your insurance policy. Your insurance policy DEC page will be a good place to start. The Declarations Page, or DEC, contains important information about your policy. If you aren’t sure where to find all of these items on the policy or have questions about your coverage, reach out to an experienced independent insurance agent to have them help walk you through your policy review.

Update Property Inventory

If there are items that have slipped through the cracks over the past year, be sure to add them to the policy. Likewise, if any new equipment has been purchased, new locations acquired, or new buildings constructed that have not been added to the policy, be sure to talk with your agent about getting coverage for them.

Include New Business Ventures or Changes in Operations

Be sure to do the same with any new business operations that have started within the past year that create new or different liability exposures than what is listed under your business’s classification on the Liability section of the policy. Any staff changes throughout the year, including seasonal employees, should also be noted.

Changes in your business operations should always trigger an insurance review to make sure you are covered. Because so many businesses had to pivot or change their business operations, this was one of the most common reasons to review insurance during COVID. Whether dealing with an external event that shifts business practices or changes risks, or adding a new business venture, a conversation with your insurance agent and an insurance review are good places to start.

3. Review What Policies Are in Place

Many business owners don’t take a very active role in their insurance buying. The result is that sometimes business owners believe they are covered for all types of losses because they believe they bought one all-encompassing insurance policy. The end of one year and the beginning of another is a great time to dig a little deeper into your insurance portfolio and get a better handle on just what types of policies you have in place to protect your business from losses.

Some Common Situations That Require Specific Policies and Coverages

These are a few examples of types of policies and coverages that may need to be included within your insurance portfolio, depending on the scale and scope of your business operations:

• Vehicles used for business purposes
• Digital records and/or electronic payments
• Furnishing or selling alcohol
• Losses that shut your business down

Vehicles Used For Business Purposes

If you have a vehicle titled in the business’s name, you need to have a Business Auto Policy. If this commercially titled vehicle is covered on a Personal Auto Policy, you could have some serious issues at claim time.

Digital Records and/or Electronic Payments

If your business maintains digital records for clientele, takes electronic payments, or relies on digital tools, you likely should be considering a Cyber Liability Policy.

Furnishing or Selling Alcohol

If your business is engaged in the furnishing or sale of alcohol, a Liquor Liability Policy is a must-have.

Losses That Shut Your Business Down

If certain types of losses would shut your business down for an extended period of time, you may need to consider adding Loss of Business Income to the Property section of a Commercial Package Policy.

4. Review Your Insurance Costs

Reviewing insurance costs on a year-over-year basis is something that every business owner should be doing. Small fluctuations are not a cause for alarm, as they are often just an indication of market trend or a carrier’s overall book-of-business performance over the past several years. However, large increases could indicate that it is time to ask an independent agent for a comparative quote.

What to Consider With Requesting Comparative Quotes

Before you take this step, keep two things in mind:

1. Make sure the increase is not due to additional or increased coverage before requesting a quote.
2. Ensure the coverages are comparable and the new quote is not for less coverage.

1. Make Sure the Increase is Not Due to Additional or Increased Coverage Before Requesting a Quote

First, be sure that the increase in overall cost has come from a significant rate increase. This would come from your insurance carrier for your classification of business. It would not come from something like an optional coverage enhancement that was added to your policy, from additional equipment or property items added to your policy over the past year, or from a policy audit that found your sales or payroll to be in excess of the estimate that the policy premium was based on at the beginning of the year.

2. Ensure the Coverages are Comparable and the New Quote is Not for Less Coverage

Secondly, when you receive another quote, be sure that the coverages are comparable. Make sure you ask, “Is it actual savings or less insurance?” as you evaluate them. It is not hard to save money on your insurance policy costs by simply gutting your coverage. But, in doing so, you can end up leaving your business vulnerable with expensive coverage gaps.

If you are interested in saving money by giving up coverage or significantly lowering the coverage limits on your policy, you can easily do that by just changing your current policy. So, if you are getting another insurance quote, make sure you are comparing apples to apples. This is an important consideration when comparing different insurance quotes for coverage.

5. Review Your Internal Policies and Safety Programs

Insurance is all about risk management. An insurance review does focus heavily on the policy and specific coverages, limits, and premiums included. However, it’s important to review your business’s internal policies and safety programs as well. Not only are these essential for the safety of your employees and your business, but they can also affect your insurance.

Also, reviewing your internal incident history and claims history can help you identify:

• Recurring issues
• Coverage gaps

With these insights, you can implement and improve processes for improved safety and better risk management strategies. By reviewing your internal policies and processes, as well as safety programs and incident history, you can ensure that your business has the necessary things in place to:

• Create a safe work environment
• Protect employees
• Protect your business

This also gives you the opportunity to document your risk management practices and improvements, which lowers overall risk and is a benefit to you when it comes time to review and renew your insurance policies.

Workers’ Comp E-Mod

Your workplace safety protocols, incident history, and claims history are taken into account when insurers determine risk. These can affect your workers’ comp E-Mod (Experience Modification Factor), which has a direct impact on your premiums. Lower E-Mods indicate you are a lower-risk insured, which can result in premium discounts, while higher E-Mods indicate higher risk and can increase your premium.

Employment Practices Liability

Businesses need Employment Practices Liability Insurance to provide liability protection for their business in case of legal action by a current or previous employee. Strong, documented internal policies and processes can reduce your risk of a professional liability lawsuit and can also result in a lower premium for this necessary business insurance coverage.

Review Your Insurance Policy to Make Sure You’re Covered

The end of the calendar year is a great time to conduct a New Year insurance review and go over all of your current business insurance coverage. This gives you a fresh start with your insurance policy heading into the new year. Plus, you can enjoy the stress reduction that comes with knowing that your policy has received a thorough review and you have made sure that you are appropriately covered.

If you would like a licensed, experienced, and dedicated commercial insurance agent to help you conduct a year-end review of your current insurance policies or provide you with a new quote, give Ruhl Insurance, a Division of Horst Insurance, a call today at 1-800-537-6880 or 717-665-2283, and we can assist you with the process from start to finish.

Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.