Well-designed programs result from planning

Most firms spend enough money to provide an adequate insurance program, but if the available dollars are mis-allocated, firms could still end up being improperly insured. If you want to get the maximum benefit from your premium dollars, you need a plan. The following guidelines should help you form a sound plan for insurance buying.

Insurance Buying Guidelines

• When the possible severity of loss is great, assumption is not feasible and the risk should be transferred to an insurer.
• When the possible severity of loss is small, the risk should be assumed.
• When the probability or likelihood of loss is high, risk reduction through loss prevention and control techniques is the most appropriate way of dealing with the exposure.
• The best buys in insurance are those where the probability of loss is low and the potential severity is high.
• If you begin with a general plan based on these concepts, designing and implementing your program will still be an involved and complicated task.

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