12.20.08
Where Not to Cut
Cutting back during these difficult times has become a must for consumers and businesses alike. Every expense is scrutinized and debated. Small businesses are also asking themselves hard questions and cutting back on all expenses, hoping to become a lean operating machine able to survive this frigid economic winter.
This is often more easily accomplished by larger businesses that likely have a little “fat” that always needs trimming. It’s a little more difficult for small businesses and sole proprietors who, in most cases, are already running a tight ship. It’s a little more challenging in those circumstances as there is little extra that can be cut. Thus, many necessary tools of doing business are often reviewed such as advertising, travel and office operating expenses.
Insurance, including liability and workers’ compensation is one such area being closely examined by businesses. Depending on the business, insurance can be quite costly to maintain, garnering the question, “Do I really need this?” While tempting to eliminate, you may want to think again.
Ask yourself a few hard questions:
- If you eliminate your liability insurance, what kind of risks are you potentially exposing your business to should there be an accident or a defective product or service that results in injury or death?
- Do you have the cash on hand to handle any potential exposure?
- Can you and your business survive the fallout from any resulting lawsuits and/or settlements?
If you can’t survive such an event, and most businesses and individuals can’t, cutting back on your insurance coverage is not the way to go.
You should however take the time to review your current policy and shop around. Often, we become complacent staying with the same insurance company or assume we are getting the best rate because we have been with that provider for a long period of time. This isn’t always necessarily the case.
There is likely a large gap between what you are required to carry by law, what you should carry and what you need to carry in terms of insurance coverage. Talk to your state insurance commission about what you are required to carry and then speak to a few insurance agents and brokers familiar with your type of business who can advise you as to what you should carry in regards to coverage.
This is one situation where if not handled correctly, the cost of cutting back could potentially outweigh any benefit you may receive from cutting back.
