Raising Deductibles and Saving Money

Can raising deductibles save my business money?

That is too vague a question to answer for any business.  Most businesses have many types of insurance with many types of coverage and deductibles.  Let’s narrow down the question as it relates to specific business insurance coverage and what to consider.

Typically, the insurance carrier who issued the policy will cover the loss up to the specific dollar limit less any deductible.  This will save your company in some cases from a cash outlay which could cripple or even close your business.  The portion not covered by the deductible is what you are required to pay.  It makes sense to review each policy and determine what deductible makes sense today versus when the policy was issued.  For instance, say a covered claim is $10,000 and your deductible is $2500, then the insurance company pays $7500 and your business is required to pay the remaining $2500.  No matter if the claim is $2000 or $40,000, subject to coverage limits (the maximum a policy will pay) your deductible remains at $2500.

So, in the case of the $2000, it is paid 100% by the business because the deductible was not met.  Deductibles can usually be negotiated or have a tier system to choose from.  When first starting out, it’s quite possible your business could only afford a minimal deductible.  Now, it’s possible that in fact you could cover substantially more for a deductible. As a norm, as deductible rise, the premium falls. Talk with your licensed insurance professional to determine what makes sense.  It’s also a good time to review coverage limits as well.  If your business has grown, it’s possible your coverage needs to as well.

Commercial property insurance deductibles can also be figured by an individual claim basis or an aggregate basis.  Typically, small companies with no or few claims will find the individual claim basis attractive.  However, if your company or industry has a large number of claims annually, it may be prudent to look at the aggregate basis.  Again, sitting down with your agent will help determine the proper course of action.

It makes sense to look at coverage limits and duplicate coverage as well.  Are policies offered with lower limits which can still protect your business? Is duplicate coverage costing extra? Can one be eliminated with a savings? Lower coverage limits may lead to savings as well.

The way to reduce costs is work with your licensed insurance professional.  Review each business insurance policy and together determine what deductibles make sense and offer the protection needed in the event of an incident.

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