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Insurance Saving Tips – Insurance Saving Techniques

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Insurance Saving Techniques
By: Allen Financial Insurance Group

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Today there are two certainties when shopping for almost any kind of insurance coverage; It will always be too expensive and you never seem to have enough when there is a loss. After the events of September 11th and a protracted recessionary economy insurance costs have sky rocketed in virtually every business sector. 

Here are some Insurance Saving Tips – Insurance Saving Techniques that may help to reduce your insurance costs. Some of them can significantly lower your premium or even eliminate the need for a particular type of coverage. Remember that the effectiveness of any risk management technique will vary with the type of risk, size of premium and your own tolerance for risk retention.

Insurance Saving Tips - Insurance Saving Techniques

Losses & Loss Control Insurance Saving Tips & Insurance Saving Techniques :

The insurance industry is cyclical. Hard and soft markets are as certain as death and taxes. Unfortunately, the onset and duration of any new cycle is unpredictable. During a “hard market” insurance companies are desperately trying to keep their ratings up and stockholders happy by improving their bottom line. This re-underwriting process requires rate increases and the culling of unprofitable lines of business. Since the insurer is dealing with thousands of renewal policy deadlines underwriting surgery is usually performed with a machete rather than a scalpel.

If you are unfortunate enough to have experienced several claims over the past two or three years you may receive a cancellation notice instead of an offer to renew. You will then be among the ranks of those shopping for new insurance with a “bad loss ratio” in a “hard market”. Making matters worse your new potential companies are being swamped with thousands of business submissions at the time when they are re-underwriting their own book of business.

Given this information, you and your broker must present your account in the best possible light. Remember, the underwriter looking at your submission is buried in work and will make his decision in a matter of minutes. The application and supporting documentation must be complete and accurate. The claims history section of an insurance application only asks for a date of loss, type of claim and amounts paid.  If you have had losses, include a good description of the loss and what you have done to eliminate the cause and prevent a re-occurrence. This alone will move you to the head of the class.

High Property Deductible Insurance Saving Tips:

An obvious maneuver to lower your insurance cost is to raise the deductibles. Always be sure to check the premium savings versus deductible cost before making a final decision. The size of the deductible and it’s discount credit are not always proportionate.  A one thousand dollar deductible may provide a 12% premium credit while a five thousand dollar deductible will result in a 15% discount.  The higher amount may not be cost effective unless your property premium is in the tens of thousands of dollars. Most small businesses do not find “mega-deductibles” to be very cost effective.

Building Construction and Fire Protection:

A big piece of your property insurance premium is determined by:

  • the construction of the building you occupy
  • the type of occupancy
  • the age and condition of the property
  • the protection class or effectiveness of the fire department in your area
  • the existence of a sprinkler system.

Surprisingly, an alarm system does not usually have a great deal of effect on your premium calculation.  That does not mean you don’t have to have one.  Most of the large insurers are now making an alarm system a requirement of coverage.  When buying or renting a property keep these items in mind when making a final location choice. 

Automobile Coverage

Automobile Insurance Insurance Saving Tips – Insurance Saving Techniques 

When the economy is in a tailspin I generally counsel clients to maintain their current liability limits or even explore higher limits.  Why you ask?  I have found that when others are in financial trouble they often go looking for deep pockets to solve their problems.

You can however, reduce auto premiums by increasing comprehensive and collision deductibles. You can also consider an alternative to comprehensive coverage called “fire, theft and combined additional perils”. This option can result in significant savings on higher valued vehicles and you are generally just sacrificing your glass coverage. 

Medical payments coverage should also be evaluated. Commercial medical rates are often disproportionately high for the amount of coverage provided. You have the option to designate which vehicles will have medical payment coverage. Questions to ask when evaluating this coverage item are:

  • Are the drivers and passengers in the vehicle covered under my workman’s compensation policy when they are injured?
  • Are members of the general public in the vehicle on a regular basis?
  • Are the passengers covered under any other accident or major medial policy?
  • Is this an essential coverage for my insurance portfolio?

Bad drivers equal bad rates. Make it clear to your employees that their tickets and at fault accidents cost you money. Always call your agent for a driving record before hiring a new employee.

Liability Exposures

Insurance Saving Tips – Insurance Saving Techniques  for Liability Exposures

Liability insurance is the stickiest and most uncertain line of coverage for your insurance carrier to write.Casualty losses for other lines of insurance are far more statistically predictable. If your building burns down the dollar loss is easily determined but when a customer is injured on your premises your financial fate is often in the hands of a jury.

Insurance companies generally charge premiums for specific activities conducted by your business. If your business offers a variety of goods and services be sure to compare the premiums being charged to your commensurate income. Very often the existence of one single exposure will prevent access to the most competitive market. For example, ABC Equestrian Center offers boarding, training, riding instruction and guided trail rides. They gross $450,000 per year of which $25,000 is generated by the trail rides. Their renewal premium increased from $8,000 to $21,000 because of the trail ride exposure and the limited number of insurers offering that type of coverage.  The renewal premium could be written through another provider for $11,000 if the trail riding was discontinued.

If the equestrian facility eliminated the rental activity entirely they would probably profit by the lower premium and reduced operating costs. This risk management technique is called Avoidance.  If ABC were to subcontract the trail rides to an insured sub-contractor they could continue to offer the service and still obtain the lower premium. This technique is referred to as Transference.


Insurance Saving Tips

Insurance Saving Tips - Insurance Saving Techniques

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Insurance Saving Tips - Insurance Saving Techniques

Insurance Saving Tips - Insurance Saving Techniques