Every business needs a variety of insurance policies. Understanding how to shop for insurance will ensure you get a good price on the right coverage for your needs.
Start by Doing Your Homework
Here’s what I recommend:
• Network – Get to know 5 insurance brokers with solid reputations.
• Identify carriers – Determine who the top insurance carriers are in your industry. Find out if your trade association endorses particular carriers.
• Check coverage requirements – Make a list of all the insurance coverage requirements in your agreements with customers, suppliers and lenders.
• Research coverage options – See what is available for the type of policy you need, and then make a list of “must haves” and “can live withouts.” For example, if you’re shopping for health insurance for your employees, is a PPO a must, or will an HMO be fine?
• Improve your metrics – Premiums are often calculated based on a formula. Find out what this formula is and then gather your historical data that relates to it. Determine if there’s anything you can do to improve your metrics before you start getting bids, then develop a projection of these metrics for the upcoming policy year based on your understanding of the formula and any changes you intend to make.
• Qualify for discounts – Learn what best practices and procedures need to be in place in order to take advantage of all available discounts. If you’re not already doing these things, start doing them now.
• Avoid surcharges – With many types of insurance, events that are considered to be outside the norm will result in surcharges. Understand what typically causes surcharges for the type of insurance you’re researching, and look at ways to avoid them.
Then Solicit Bids
By this point you should have a thorough understanding of what’s out there and what you need, and a projection that includes estimates of the metrics that the insurers need to know.
Reach out to two or three of the brokers on your list and ask for quotes. Be specific in your communications to ensure you’ll be able to make “apples to apples” comparisons once the quotes come in – in terms of both the assumptions that the insurer uses to calculate the quote and the specifics of the coverage provided. Evaluate the quotes, and move forward!
Need help shopping for insurance for your business? As your part-time CFO, this is one of the many services I provide.