Introduction

As a business person, you face many risks. A great number of insurance contracts have been designed to meet these risks, leaving you with the problem of deciding how to use the available insurance coverages to the best possible advantage. With a limited number of dollars available for the purchase of insurance, how can you allocate these dollars to provide the best possible protection.

Giant corporations may employ full-time specialists who devote their attention to the firm's insurance and loss control safety programs, but in smaller firms, buying insurance and reducing risks are just some of the many jobs performed by the owner or manager; consequently, these jobs sometimes receive less attention than they deserve.

While the field of insurance may be complicated, developing a sound philosophy of insurance buying is not. In these few short pages, we offer some suggestions to help you avoid costly mistakes in buying insurance for your business.

The Most Common Mistakes

In general, costly mistakes in buying insurance fall into two categories: buying too little and buying too much. The first, which is potentially the most costly, consists of a failure to purchase essential coverages, thus leaving the firm exposed to an unbearable financial burden. Unless your insurance program is designed to protect against the catastrophes to which you are exposed, you could lose your entire life's work in a single, uninsured loss.

On the other hand, it is also possible to purchase too much insurance. Sometimes it is possible to make both mistakes at the same time. Many firms ignore essential coverages, leaving gaping holes in their overall protection, while at the same time purchasing coverages for risks that should more appropriately be assumed.

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