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Preparing Yourself Before Evaluating the Insurance Marketplace
Information is the key to
finding the best agent, insurance company and policy for your
business, and much of that information will come from you. Before
you choose and meet with an independent agent or broker to discuss
insurance, compile the following information:
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Current business
insurance policies
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Updated payroll and
sales records
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Current profit and loss
statement
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Loss information from
the current and three prior years
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Your OSHA log, if
available
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Current schedule of
vehicles and Motor Vehicle Reports (MVR)
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Safety
programs/procedures and safety meeting records
Your company's promotional
literature Once your papers are in order, assess how much risk you
should retain - the deductible. The risk the insurance company
assumes is the limit of liability over and above the deductible.
Insurance allows you to transfer the risk of financial uncertainty
to an insurance company for a known premium. So, first calculate how
much of that financial uncertainty you're willing to take on and how
much risk you want the insurance company to assume.
Generally, the premium you pay depends on the deductible, or risk,
you're willing to assume if a loss occurs. By choosing a higher
deductible, you retain more risk, but pay a lower premium. On the
other hand, if you choose a lower deductible, your premium will be
higher.
When premiums are high or coverage is difficult to obtain, you may
want to choose a higher deductible and directly pay for smaller
losses. The premium savings you'll realize may allow you to purchase
other essential coverages. This strategy makes the most of your
insurance dollar, providing you with the maximum protection against
losses that can result in bankruptcy, debt financing or the
postponement of future business plans.
If you take this approach, make sure you build the average annual
costs of smaller losses into your budget. Once you've determined how
much risk you will retain and how much risk you want the insurance
company to assume, you're ready to choose an insurance agent.
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