Whether insuring commercial or personal risk, just about everyone is interested in reducing their insurance premiums. Quite a few of my clients call in to say the same thing to me every year, “Joyce, I haven’t had claim in 20 years. I am frustrated with the cost to keep my insurance but is a requirement of my contracts with my clients. I know that I will never have a claim”.
Many assume that removing or reducing their insurance coverage is the only solution to reduce their insurance costs, but this is not the case. And when you have minimum insurance requirements, it is often impossible to reduce or remove coverage without repercussions.
Today, we want to discuss two creative solutions to help reduce your insurance premiums.
The First Solution: Build a Self-Insured Retention Fund
Often, people see self-insured retentions on excess liability policies, but your business might want to think about the benefits of having a fund for your insurance deductibles or retentions. It is always important to select a deductible high enough to reduce costs, but within your budget if you were to incur a loss. A general rule of thumb is that a higher deductible results in a lower premium, and vice versa.
If you compare the pricing of a policy with a $5,000 and $0 deductible, you will be able to compare the annual savings. By multiplying that number by 10 years, you see the difference between these two numbers begin to soar apart. So, why not just create a saving fund for your business while decreasing your insurance premium?
The Second Solution: Invest Intelligently in your Company’s Assets
Updates to your HVAC, plumbing, electric, or roof will generally reduce insurance costs. But do not forget about other protective safeguards that could save you some premium dollars! From central station burglar alarms to annual cybercrime training, there are millions of ways to reduce your company specific risks with some creativity.
Now let us take a moment to talk specifically about roof updates. Here is the thing about roofs – They are expensive to repair, and more expensive to replace! Insurance consumers do not want to replace them, and neither do their insurance companies.
Let us quickly walk through the total cost of ensuring an out-of-date roof to begin to see the true costs of an out-of-date roof, so you can see how the costs can add up in many ways:
1. Admitted Carriers will decline to offer coverage on a roof that is past its life expectancy. Non-Admitted Carriers charge extra taxes and fees, on top of your premium that is nonrefundable.
2. Non-Admitted Carriers also cost more in the actual rating basis. If your Admitted Carrier charges $100 per square foot, the Non-Admitted Carrier will generally charge at least $130.
3. Non-Admitted Carriers are not backed by the Florida Guarantee Fund. You are at risk of losing all owed recovery for your claim if your Non-Admitted Carrier becomes insolvent.
4. Roof will likely have Actual Cash Value endorsement, rather than Replacement Cost Value. This could result in a covered claim paying out $0 if the roof is past its useful life expectancy. Not only would you need a new roof and have no recovery from the carrier, but you will also have been paying for insurance on a roof that is not recoverable.
In summary, insurance costs can seem overwhelming at times, but there are ways to reduce your insurance costs without removing or reducing your insurance coverages. Give us a call today to discuss ways to create a self-insured retention fund or invest in your commercial or personal assets, while saving premium dollars annually on your insurance costs.