How do you determine what to insure and assess the risk?
Avoidance of Risk
Are you able to avoid or eliminate a service or business activity that is deemed too risky? By identifying and avoiding risk you can eliminate those activities that may lead to a higher risk level than what you are comfortable operating at. This will also help stop your business from creating or engaging in risky activity in the future.
Prevention or Mitigation
If there is a risk that you are aware of, what steps can be taken to either prevent or mitigate the likelihood of a loss? Your business can take a proactive approach to risk management by creating activities and implementing programs in the workplace or through your supply chain that reduce the probability of a risk occurring. For example, to reduce risks in a workplace that involves production of goods, having a healthy and safety officer to review plans and point out issues that could lead to a risk. Most importantly, it can help you ensure that those involved in your business are kept safe.
Transfer of Risk
Are there any areas of your business that you are able to transfer risks to another party? This is where insurance policies come into play since you are able to transfer your risk where premiums are pooled to cover those insured, meaning no money out of pocket besides premiums and deductibles. For example, if you own a construction business and you cause damage to the city’s property, you could be liable for $400,000 worth of repairs. With an insurance policy, once the deductible is paid you are no longer financially on the hook for the accident. Without a policy, you would be expected to provide all financial losses to the respective parties. Another form of transferring risk is having releases and waivers in place.
Sometimes in order to operate in your industry risk is unavoidable and is part of the job. At that point the risk needs to be accepted and insured against in the event of a loss. You have options when it comes to the severity of the risk and your comfort level. You can either choose to self insure the risk, meaning that if there is a claim your business will be accountable for the financial and physical portion of returning to normal business operations, or you can purchase an insurance policy and the financial burden will be the extent of your deductible.
Risk management is an important aspect of your business, and having an effective plan such as adequate insurance coverage can help ensure that your business is in business for many years to come. For more information on risk management strategies or any questions regarding insurance for your business, talk with an MIG broker today!