How to Trim the Fat Off Your Insurance Bills
by Barbara Weltman on January 3rd, 2008
It’s no secret that the cost of most types of insurance is on the rise–from liability coverage for your business to car or health insurance. You can’t afford to go without coverage because an incident can put you out of business. But you can fight against price hikes back by taking certain steps.
Property and liability coverage
Protect your equipment and other business property as well as insure against claims by third parties for injury on your premises with a business owner’s policy (BOP). Shop around for adequate coverage at the lowest price. Before your policy is up for renewal, work with an insurance agent to get you the best coverage possible. Don’t wait until the last minute when you’ll be forced to accept whatever can be quickly obtained.
If your business is home-based, don’t assume your homeowners’ or renters’ policy will cover you–there may be a limit on or exclusion for business-related incidences. The least costly solution for proper coverage: Add a rider to an existing policy where possible. If not, you’ll need to purchase a separate in-home business policy.
Car
Decide who should own your vehicle–you or your company by running the numbers. For example, if the company has three principals, there may be a fleet discount on insurance for company-owned cars.
To keep premiums down, gamble a little by raising your deductible. For example, doubling the policy’s deductible (say, from $500 to $1,000) can cut insurance rates by 15%.
Ask your agent or the insurance company for a listing of discounts available (e.g., discounts for "good drivers," low mileage, ABS breaks and anti-theft devices). Check employees’ driving records before allowing them to use company vehicles to avoid any future increases.
Idea: Make sure there’s coverage if you’re in an accident with your personal car when you’re on business–the policy may exclude business-related liability. For coverage, the business name may have to be included on a personal policy in order to be covered.
Health
Think outside the box to slash your medical costs. Create accounts that employees can use to pay medical costs not covered by insurance (withdrawals from these special accounts for this purpose are tax free). Your options:
* Health savings accounts (HSAs) can be used to cut a company’s medical costs by up to 40%. The company arranges for a high-deductible health plan, which costs substantially less than traditional health coverage. Then contributions to IRA-like accounts are made by the company and/or employees (up to limits fixed annually by law); the party making the contributions claims a tax deduction for them. These accounts belong absolutely to employees, who can take them when they leave the job.
* Health reimbursement arrangements (HRAs) . The company also switches medical insurance to coverage for major incidents only, saving considerably on premium costs. It then contributes a fixed dollar amount (set by the company) to a special account for each employee, which costs the company less than it would have paid in premiums on more traditional (comprehensive) medical coverage.
* Flexible spending accounts (FSAs) . These accounts, which can pay medical costs not covered by insurance, are funded with employees’ pre-tax dollars. If money is not used up by the end of the year (or within a 2-1/2 month grace period), the funds in the account are forfeited to the company.
For more information, see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, at www.irs.gov .
Idea: If you’re self-employed, look for lower cost coverage through trade or professional groups, or your local chamber of commerce.
Workers compensation
If your company has employees, it usually must carry this coverage to protect workers in case of on-the-job injury. The premiums are tied in part to the number of accidents or occurrences, so safety measures can cut costs.
* Keep office space in good physical condition (e.g., no cuts in carpeting that can lead to trips and falls).
* Make sure workers operating any machinery do so safely. Provide proper training and any necessary safety equipment.
Find out more about safety requirements from the U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA) at www.osha.gov ("click on small business").
