For many business owners, getting insurance is a hassle up there with taxes, bookkeeping, and other administrative tasks. But Tod O’Dowd, president of Wolfeboro-based Avery Insurance would like to see that change.
“It’s a mindset shift,” says O’Dowd. “Looking at it as part of your whole business plan should be a key element.”
Most businesses in NH are required to have insurance. By state law, almost all businesses are required to carry workers’ compensation, according to the NH Insurance Department’s insurance checklist for businesses (see sidebar). Lease and lending agreements often require property or auto insurance for commercial locations, and best practices call for having liability insurance as well, experts say.
As the fourth generation to run his family’s insurance company, O’Dowd knows about the constant decisions that business owners must make. He says that being proactive about insurance and developing long-standing relationships with insurance agents can help businesses adequately protect themselves, while keeping costs as low as possible.
“[One] of the biggest mistakes is looking at [insurance] as just a cost, and not a valuable tool in protecting their future,” he says.
Start with Requirements
As a business owner it’s natural to wonder what insurance you must have, legally speaking. Granite State businesses must have workers’ compensation, even if they have just one part-time employee, says Doug Carignan, commercial account executive with HPM Insurance in Laconia.
“Workers’ comp is usually a large expense,” he says, so it’s important to make sure that all employees are properly categorized. Coverage is more expensive for riskier job descriptions, so accurately classifying employees can keep a business from paying an unnecessarily
high premium.
Business owners who have a lease, mortgage, or loan may be required to have property or auto insurance by their bank, O’Dowd notes. Often, banking requirements are the entry point to talking about business insurance, he says.
While getting these required coverages is a good starting point, it’s only the beginning. “The biggest mistake we see is business owners confusing legal compliance with adequate protection,” says D.J. Bettencourt, commissioner of the NH Insurance Department. “Meeting the minimum requirement may satisfy the law, but it won’t necessarily help your business when something goes wrong.”
What Liability Insurance Do You Need?
Once a business has the required insurance types in place, it’s time to think about what additional coverage the business needs, and what level of risk owners are willing to take.
“You want to have a more long-range plan—what’s the risk factor that could put me out of business?” says O’Dowd.
Liability insurance protects against those risks. The exact type of liability insurance that you purchase will depend on the type of business you’re operating, Carignan says, but in general, liability protects the business from costs associated with injuries or property damage.
One often-overlooked type of liability coverage is employment practices liability, Carignan says, which protects owners from damages arising from allegations involving discrimination, wrongful termination, and harassment, among other things. Owners often wrongly assume these issues are covered under worker’s compensation or general liability, but they’re not, he adds.
Liability insurance is critical because the costs associated with accidents can be so high, says O’Dowd, noting that something as common as an auto accident can cause millions in damages. “It’s almost impossible to self-insure liability,” he says.
However, there are other areas where business owners might consider self-insuring—which means going without coverage knowing that you’ll be responsible for covering costs if something goes wrong. For example, a contractor might choose to not insure their tools, instead opting to funnel that money toward other expenses.
“It’s an affordability issue,” O’Dowd says. “You could spend a lot, but is that the best use of your dollar?”
Build Personalized Relationships
Working with an insurance agent who understands your business (and the legal requirements in NH) is key to making sure you have the right amount of protection, experts say.
“Too many businesses rely on generic online advice,” Bettencourt says. “Insurance isn’t a product you buy, it’s risk management. Those protections should be specific, intentional, and informed.”
O’Dowd says that the old advice to shop around to three different agents is outdated. These days, an agent likely works with dozens of insurance companies; instead of shopping agents, he recommends working with someone who really knows your operations and can shop your insurance needs to companies that will bid against each other.
“Just like you don’t have three CPAs working on your taxes, you don’t need three different agents,” he says. “Find one who values you, build trust, and work with them to get the best coverage and costs.”
Revisit Your insurance Coverage
Once you’ve got insurance coverage, you’ll need to review it at least annually—though a more frequent review is often required. Every time a business expands, shrinks, or pivots, its insurance needs likely change. Having a mismatch between your business and your coverage “is where losses can turn into a crisis,” Bettencourt says.
As a rule of thumb, O’Dowd recommends checking in with your insurance provider every time you’re asked to sign a major contract. Contracts are often a way of shifting legal liability from one party to another, he notes, so they should prompt an insurance review.
Carignan adds that a trusted insurance agent can “be a sounding board for any changes [business owners are] considering making.” He also encourages people starting a business to reach out to an agent early on.
At Avery Insurance, agents meet with their biggest clients quarterly, and encourage other business owners to be in touch well before their current insurance plan expires to identify the right coverage moving forward. “It really boils down to making insurance a regular conversation,” O’Dowd says.
