09 September 2019

Business Insurance: Four Questions for Choosing Your Deductible

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It’s important to take the time to decide on the right deductible for your business insurance. Why? Read on for the answer. We’ll tell you what you need to consider, depending on your situation, to make a well-informed and smart choice.

1. WHEN DOES THE BUSINESS INSURANCE DEDUCTIBLE APPLY?

First, let’s recap what a deductible is. For business insurance, often called “commercial insurance,” your deductible is the amount your business will be responsible for in the event of a claim.

In other words, if the property damage is less than the amount of the deductible specified in the policy, your business will not be eligible for compensation from your insurer. But if the damage is more than the deductible, you’ll be compensated up to the coverage amount for property damage, and the claim will be subject to the deductible.

But when does the deductible apply in business insurance? The answer to that question not only shows the importance of choosing your deductible wisely, but also explains why Chambre de l’assurance de dommages stresses the need for all companies, large and small, to have “business insurance”: The deductible applies to the company’s buildings and everything on the premises (merchandise, equipment, etc.).

2. IS A HIGH DEDUCTIBLE RIGHT FOR ME?

This is always a good question when choosing a deductible but is especially important for business insurance. In the event of a small loss, it is not worthwhile for the company or the insurer to spend time and energy on the claim process.

Some companies even prefer not to have a claim for minor damage on their record, to avoid an increase in insurance premiums. So even though your instinct might be that it is always worth making a claim when you have insurance, in reality that is not the case.

If you’re already sure that you won’t be making claims for small amounts, the answer is “yes”: A higher deductible is right for you because your company’s insurance will be cheaper.

3. WHAT DEGREE OF RISK IS REASONABLE FOR MY COMPANY?

This is something you need to think about very carefully. Just as it is crucial to have business insurance coverage, it’s also very important to take a close look at how much risk your company can take on. What is an acceptable risk for one company is not necessarily acceptable for another.

How much financial leeway does your company have? How much money is available without jeopardizing the smooth operation of your business? These are the types of questions you need to ask yourself. Analyzing the balance sheet can help you figure things out. One thing is certain: You don’t want to take a major risk that could put your business in danger.

As you can see, it’s up to each company to do its own assessment based on its own circumstances.

4. HOW DOES THE AMOUNT OF MY DEDUCTIBLE AFFECT WHAT I PAY FOR BUSINESS INSURANCE

Once again, it varies and it depends. One way to know is to consider a number of different situations. Ask for several insurance quotes where the only difference is the deductible.

Then compare the premiums for each deductible. See how much you could save each year based on the amount of the deductible. Can you save a significant amount on your premium with a higher deductible? You can also compare the amount you’ll save to the amount of your deductible over a certain number of years. It’s a good idea to do the math based on several different options.

Now you know just how to choose the deductible that’s best for your business. Make sure you also have adequate third-party liability insurance to cover accidental harm to others. This type of coverage is also subject to a deductible. To sum up, time spent on choosing business insurance is never wasted. Contact us today for a quote for your business!