* Choose deductibles wisely. Since a higher deductible usually means a lower premium, you want to hit that “sweet spot” where the deductible you choose balances your risk profile. Don’t choose a deductible that’s so high, it could have a negative financial impact in the event of a loss; but don’t choose one that’s lower than you need based on the risks your business faces, either.
* Make sure your property values are in line with policy limits. Have you purchased new equipment or upgraded your facility, or perhaps scaled back in some way or made improvements that could lower your premium? Make sure to let your insurance company know about changes in your property value or additions like an upgraded security system to ensure you have the right amount of coverage at the best possible rates.
* Know your loss ratio. Your loss ratio is determined by dividing the annual premium that you pay by the amount of any claims you’ve made in the past year. Most insurance companies look at loss ratios for the past several years when determining risk. A lower ratio means less risk, and that means lower rates and better deals for you. Knowing your ratio can help you prepare for rate increases and it can also help you negotiate for lower rates when your ratio is favorable.
* Plan for price shifts. Like other commodities, the cost of insurance is cyclical, and if your rates have been low for a few years, there’s a good chance they may go up in the near future. Avoid “sticker shock” by budgeting at the high end of the market so you’re prepared for potential price increases.
Look for more tips in next month’s issue.
