How To Assess Your Insurable Business Risk
One of the biggest challenges businesses face is making sure that risks don't wipe them out. Many use business insurance as a tool to reduce the odds of disaster. It's critical to assess your insurable risk accurately so you'll have enough coverage, appropriate premiums, and a deductible you can handle in the event something happens.
How do you assess insurable risk, though? You can benefit from following these three tips.
Examining Possible Liability
Some businesses face greater liability than others. Many licensed businesses that conduct known dangerous activities face what's called strict liability. This is a form of legal liability where the defendant is accountable for all damages if their actions were the cause of a victim's injuries. For example, a construction company that uses explosives would be strictly liable if debris from a demolition-related explosion hit a bystander.
It's also wise to consider the scenarios where you might be liable. A business with a sidewalk out front, for example, has liability exposure because someone might experience a slip-and-fall accident. Consequently, it needs a business insurance policy that covers such an incident involving the sidewalk.
Deductibles and Potential Financial Losses
There is always a question about how well a business might take a financial hit. This question often determines how large of a deductible it can afford to have. Higher deductibles mean lower monthly premiums for business insurance. However, there is a danger to your business if your deductible exceeds what you can afford to pay at any given time. It may be a good idea to pay a higher premium to avoid a deductible you can't easily cover.
If you graph all of the insurable risks a business faces and how likely they are to occur, you'll get a normal, curved distribution. The stuff in the big part of the curve would be the expected things, such as on-premises injury claims or damage to inventory. These are the things you may already have business insurance to cover.
The thin part of the curve represents the rare events, the so-called tail risks. Although such risks might be uncommon, a few of them may pose existential threats to a business. For example, flooding might be rare at your location. However, a flood could still wipe your business out, and you may not be insured against it.
The rarity of these events often makes it possible for an insurer to offer low premiums for coverage. You should take advantage of lower costs to purchase more insurance against potentially costly tail risks. contact a company that provides business insurance for more information.