Why You Should Review Your Commercial Insurance Annually
A lot can happen in a year … especially when you own a business.
I’m sure 2020 has been a great example of that for most of you.
Here at Berry Insurance, we certainly experienced it. We added expenses in some areas, reduced them in others, purchased new equipment, and switched to remote operations for much of the year.
Because insurance happens to be our area of expertise, we knew exactly where we would need to adjust our business insurance policies because of those changes, but for most businesses, it’s not top of mind.
Fortunately, we can help.
Whether it be a year of change, like 2020, or a relatively consistent year, it is important to review your insurance annually. Even the smallest changes you make within your business come with unique risks, so you need to make sure you’re keeping up with those changes and adjusting your insurance accordingly.
Let’s talk about some of the reasons you should be reviewing your business insurance policies annually, and what you should be considering when reviewing it.
Reasons to review your insurance:
For most commercial insurance policies, your agent or carrier will automatically renew your policy every year. Before this renewal, it is essential you review your coverages to make sure everything from the year before is still accurate, and that you have the best coverage for the best price. Let’s dive a little deeper into why annual reviews are so important.
You might not have adequate coverage
A lot changes within a business during the course of a year. We’ll get into some of those potential changes below, but even the smallest development or change in your business operations could cause a gap in coverage.
Annual reviews will examine all areas of your business to make sure you have the proper coverages and limits.
Imagine for example, that you added a piece of equipment to your company. If you renewed your business property without adding coverage for it, claims related to that equipment might not be covered.
Annual reviews will also identify if your business changes warrant any new types of insurance, such as cyber insurance, professional liability, or commercial auto.
You might be missing out on savings
Aside from not having the proper coverage, by not reviewing your commercial insurance, you might actually be paying more than you need to for this coverage.
Reviewing your current business circumstances will help your insurance agent or carrier make sure you are paying the right price for your coverage.
There may also be some discount opportunities available, so during your annual review, your agent can make sure you are taking advantage of all savings opportunities.
Things that might yield changes in your policies
So now that you understand the importance of annual insurance reviews, let’s go over some of the areas that will actually be reviewed. There are a number of business changes that can influence your insurance.
When you’ve had changes in operations:
If something changes about the way you operate your business, such as the services you provide or the products you sell, you might need to make changes to your insurance policies.
Having more products or services means you likely have new equipment or inventory you need covered. On the other hand, if you removed any products or services, you will be able to remove them from your insurance.
You may also need to adjust your limits if the risks associated with your operational changes have altered.
When you’ve made property changes:
If you’ve made any improvements or upgrades to your business property or building, you will need to adjust your insurance to reflect it.
Assuming you put a lot of money and work into implementing the changes, you’ll want to make sure they’re covered under your policy.
You’ve purchased new equipment:
If you rented/leased or purchased any new equipment or property in the past year, you’ll need to include it on your renewed insurance policy so it’s protected from any risks going forward.
When you’ve had changes in staffing/payroll levels:
Your insurance carrier likely uses your staffing and payroll levels to determine both your limits and your premium on certain types of business insurance.
Have you hired or terminated any employees? You’ll need to inform your agent to make sure your insurance payroll reflects it.
If you hired or used any subcontractors, you’ll need to let your insurance company know so they can increase or reduce your estimated payroll figure or potentially change insurance classification codes.
When you’ve had changes in revenues:
Similar to payroll and staffing levels, revenues also play a role in determining your insurance limits and premiums.
If your business’ revenue changes, your insurance policy also needs to change.
When you’ve had changes in ownership/business structure:
Usually, when there are changes in the business structure of a business, the current commercial insurance policies will need to be updated.
If you’ve had a change in ownership, your business name, or business entity structure (i.e. sole proprietor, LLC, partnership, corporation) you will need to inform your insurance company.
While sometimes an insurance adjustment will suffice, in some of these scenarios you might need a whole new policy.
For example, if your business is transitioning from a partnership to a corporation, or if it involves a merger with another organization, you will almost certainly need a new policy because so many factors will change.
When you’ve had territory changes:
If you have any territory changes, such as moving, adding new locations, or beginning to offer services in new states, you will need to change your insurance policy.
Expanding offerings comes with additional risks and every state has different laws and insurance requirements, so you’ll need to make sure your insurance is up to par.
When you’ve had new contracts:
New contracts = new risks.
If you have new partnerships or created additional contractual obligations, you probably need more coverage. Some partners or vendors might even require you to have certain insurance limits to ensure they are protected.
You should send all contracts to your agent to review, so they can make sure your insurance is up to par.
When you’ve made changes to your business vehicles/drivers:
Have you leased/rented or purchased any new vehicles? Have you made any changes to authorized drivers?
You’ll need to make sure your commercial vehicle policy is up-to-date.
Don’t forget to look ahead:
When considering your insurance plan for the next 12 months, you should also be thinking about if you’re anticipating any business changes in those next 12 months.
If you’re proactive in updating your insurance, you won’t need to worry about potentially not being covered when those changes occur.
Here are some considerations you may need to take for the next year:
• Changes in ownership or operations
• Buying or selling a business
• Relocating or acquiring new space
• Making updates or renovations to any buildings or property
• Increase or decrease in estimated revenues
• Increase or decrease in estimated payrolls
• New operations, jobs or projects outside of MA
• Business travel outside of the U.S.
Let us do the thinking for you
We know you’re busy. Owning a business is hard work, so we understand if your annual insurance renewal isn’t top-of-mind.
Fortunately, if you are one of our clients, we can do the thinking about your annual insurance reviews for you.
Independent insurance agencies like us usually monitor all our client accounts and reach out to schedule account reviews. After all, we want to make sure you have the best coverage at the best price.
But, if you want to get a head start and prepare for one of these reviews, feel free to download this checklist with everything you need to consider about changes in your life that could affect your commercial insurance.