Don't Risk a Lot to Save a Little

June 5, 2009

Over the past year, most business owners have been cutting expenses where possible, usually by eliminating “extras.” Your insurance program may be and should be one area you can examine to find cost-saving advantages. Perhaps you’ve sold or depreciated some equipment or vehicles that can be deleted from your insurance policy. You may have changed certain operations to eliminate exposures that no longer need to be insured. That’s why it’s important to review your insurance program with your marketing representative annually and inform us about any changes.

However, as you contemplate any reductions in your coverage, be wary of reducing your limits of insurance to save premium dollars. In the event of a devastating loss, such as destruction from a tornado or a fire, you could be disappointed if the insurance settlement falls below your expectations. Inadequate limits of insurance could prevent you from reopening your doors.

It’s important to keep accurate records of your business property values, including current appraisals of your buildings and receipts for equipment and other purchases. A machine purchased 15 years ago could cost two or three times as much to replace at today’s prices. Your limits of insurance should reflect the replacement cost of your property—not necessarily the purchase price.

There are many practical ways to reduce insurance costs and keep your property adequately insured. You don’t need to cut insurance expense at the expense of your business.

This article provided courtesy of Federated Mutual Insurance Company, your association’s recommended insurer.


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