Saving Money On Insurance Premiums

How To Reduce Insurance Premiums Without Reducing Coverage

Every business needs insurance coverage to mitigate risks in the operations of the business.  Many small business owners just purchase the required insurance policies and take the recommendations of the insurance agent.  Insurance premiums often rise and risks are often increasing.  Small business owners often don’t have the knowledge of insurance to understand ways to reduce their insurance costs by either reducing premiums or eliminating them altogether. 

Reduced company insurance premiums 15% by establishing a reserve fund to cover increased insurance deductibles

The company had various insurance policies where we insured for the various standard risks we knew were important to cover.  It doesn’t usually seem like a major cost item on the overhead list, so we don’t like to spend much time on it.  However, there is a very simple solution for reducing insurance premium costs.  In briefly reviewing the various insurance policies we had, I found that with the amount of available cash in the company we could consider self-insurance on optional policies and increasing deductibles on other policies.  The question was whether it was worth doing.  After doing some calculations I realized that in some cases it was. I can estimate how long I expect to go before making a claim on the policy, for example, and add up the amount I would have paid in premiums to see if it adds up to a significantly greater amount than the claim.  If it doesn’t, I should be able to self insure, and drop the insurance.  If I self insure, that means taking the amount I would pay in premium and set it aside each month in a “sinking fund”.  If we suffer a loss for that risk item, we take the funds from there to cover the losses.  Otherwise, we keep the money.  For deductibles, we do the same thing but compare the difference in premiums for the higher deductible and determine if we save money by putting the difference in a sinking fund to pay for the deductible in the case of a claim.  By doing this on all of our insurance policies, we saved 15% on our insurance premiums.

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2013 Jim Anderson

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