As your business grows and your risks evolve, your insurance needs will change. Coverage that worked well for you in the past may no longer meet your requirements. The worst time to realize this is when you’re facing a claim. But, regular business insurance policy reviews can help you proactively manage your insurance coverage and help ensure you have the coverage you need when you need it.
Why is an insurance policy review necessary?
Securing insurance coverage can be a hassle. Even if your broker does the legwork of shopping around for the best policies, it takes a fair amount of your time as well. Evaluating policies can be like comparing apples to oranges due to all the different terms. At some point, though, you may need to conduct a business insurance policy review and update your business insurance coverage types.
There are many reasons you might need to update your coverage, such as:
- Your property’s value has increased. You need to insure your commercial property for its full value. Otherwise, you won’t have enough coverage if a disaster strikes. In fact, even smaller claims may have a coinsurance penalty for underinsurance. As your property’s value increases, you need to increase your limits. Property valuation increases may be gradual or may happen quickly when inflation surges. You also need to pay attention to replacement values, which can increase due to changes in building material and labor costs.
- Your company has branched out. Maybe your company has started offering new services, or maybe you’ve moved into a new geographical area. Either way, you need to review and scale your business insurance needs. Since new services can entail new risks, you likely need new coverage – and securing more insurance coverage may even be a requirement in your state.
- Your company has grown. Even if you’re doing the same thing you’ve always done in the same area you’ve always done it, you may need more coverage if your company has grown. For example, if you have more employees, you may want to increase your employment practices liability insurance limits.
- New risks have emerged. It’s not just internal changes in your company that drive the need for insurance reviews – external changes can also trigger the need for new coverage. For example, a few decades ago, no one was thinking about the need for cyber insurance or emerging risk technology. Now, with the rise of ransomware, identity theft and other types of cyberattacks, many businesses consider cyber insurance to be essential. The increase in data privacy laws and enforcement of these laws may even make additional coverage mandatory.
- Exposures have evolved. Commercial auto insurance is a great example. Thanks to market and industry changes, particularly those affecting commercial auto coverage such as escalating jury awards and nuclear verdicts, auto liability limits that were sufficient five years ago often don’t offer enough protection today.
How often should you conduct an insurance review?
You should plan to conduct a policy review with your insurance broker at least once a year, or even as frequently as monthly or quarterly for highly dynamic companies. The following circumstances might also necessitate reviewing your commercial insurance policies:
- Before your policy is up for renewal. Ahead of your renewal, check your coverage to determine whether you need to add any new protections or increase your limits. Contact your broker about any concerns roughly three months before your renewal date so they have ample time to shop for coverage and secure the best rate. Anticipate and prepare for potential challenges. For example, if insurance rates have been surging or you’ve had frequent or severe claims over the past year, your renewal may come with a premium increase. If that’s the case, you may want to contact your broker even earlier to formulate a strategy.
- When your company makes big plans. The prime example is a merger or acquisition. If your company is planning to buy, sell or merge, look into transactional risk insurance. Other big plans – such as expansion into a new region, the launch of a new product or the purchase of a new fleet – could also trigger the need for an insurance coverage review.
- After any unexpected change in your company’s situation. Sometimes, things happen outside your control. Maybe you had to shut down a location and reopen elsewhere, or perhaps new laws governing your industry have recently passed. Any major changes should trigger an insurance policy review.
- As new risks emerge. It’s important to keep an eye on the risk landscape to be proactive about securing coverage. Cyberattacks and data privacy risks are good examples, as well as the recent rise in greenwashing lawsuits against companies that exaggerate their environmental policies in advertisements.
Your Insurance Policy Review Checklist
When you conduct an insurance policy review, an insurance broker can help you make sure you don’t miss anything. The basics you need to cover include:
- Your Policy Types: Take stock of all of your policy types, including commercial auto, commercial property, business interruption, commercial general liability, workers’ compensation, employment practices liability and errors and omissions (E&O) insurance, among others. Look for any coverage gaps and consider whether you need additional business insurance coverage types in light of evolving risks. For example, you may decide to buy an umbrella insurance policy.
- The Policy Endorsements: Endorsements can add coverage to your policy. These often provide coverage for additional loss types. Determine whether your endorsements are sufficient or if you need something else.
- The Policy Exclusions: Pay close attention to exclusions, particularly when renewing a current commercial insurance policy. If you want coverage for something that’s excluded from a policy, you’ll need to add an endorsement or purchase a standalone policy.
- The Policy Limit: You may need to increase your limits to keep up with inflation. Consider whether you also need to increase your limits in response to social inflation, which is the rise in insurers’ claim costs due to increasing litigation costs and jury awards.
- The Deductible: This is an area where you have some control over your coverage. By increasing your deductible and retaining more risk, you may be able to secure more affordable coverage. In a hard insurance market, this can be a good strategy.
- Changes in Terms: At renewal, pay close attention to any changes in coverage terms. Work with your insurance broker to make sure you understand what the changes mean and how the new terms could impact any claims you have in the future.
Get Help with Your Next Business Insurance Policy Review
There’s a lot to consider when conducting business insurance policy reviews. You need to understand the fine print in your insurance policies and how this can impact real-world claims while also keeping up with evolving risks and coverage trends. However, you don’t need to do all this alone: Higginbotham can guide you through your next business insurance policy review. No matter your industry, we offer commercial insurance packages designed with your needs in mind. Learn more about our commercial insurance offerings and speak with a specialist today.