Risk Management for the Food Service Industry

Chapter 3: Tips for Purchasing Food Services Business Insurance
Part 1: Finding Small Business Insurance on Your Own

If you're new to the world of small business insurance, it's not uncommon to feel overwhelmed. With hundreds of companies vying for your dollars and promising the moon, you may have a hard time separating the wheat from the chaff.

So let's start from the top. To find a quality business insurance plan without the help of an agent, you'll need to complete the following tasks.

Evaluate Your Risks

We've talked at length about the common risks food services businesses face, but every company is different. Before you even open your browser, take some time to consider your business:

  • Which disasters could you not handle on your own?
  • Which equipment do you depend on to serve your customers and clients?
  • Which policies does your state require you to carry?

When building a business protection plan, it's essential to consider all worst-case scenarios. Though your insurance can help get you through smaller financial hiccups, your protection is most useful for events that could threaten the future of your business.

Choose Your Insurance Provider Wisely

In the Internet age, you can never be too careful when buying insurance. After all, you don't want to be the victim of a scam – or end up with an inexperienced insurance company. As you're searching for the insurance carrier that will be your saving grace in hard times, you'll want to be sure you choose someone you can trust. Consider the following:

  • Does this provider have experience insuring small businesses?
  • Does this provider have experience insuring food businesses?
  • Is this provider credible?

One way to determine the credibility of a provider is to check for proper licensing. Also, make sure the company is covered by your state's guaranty fund. A guaranty fund acts as a safety net in case the insurance company defaults. This information is available through your state's insurance department.

Find the department you need on the National Association of Insurance Commissioners' "Map of NAIC States & Jurisdictions," and click on your state.

Check Insurance Companies' Ratings

Verifying experience and licensure is just the beginning of your hunt for a trustworthy insurance provider. Another major consideration is the carrier's reputation. How well do they treat their clients? Do they offer industry-tailored products? How painless is the claims process?

The key to uncovering their track record is by checking their rating. If the provider boasts an "A" rating, then you know you're in good hands. A-rated carriers have built their businesses on reliable terms, quality products, and quick payouts.

To compare insurance companies' ratings, check out A.M. Best's website and look up your prospective provider.

Request Quotes from Multiple Insurance Providers

After you've compiled a list of credible insurance carriers, you'll want to request quotes from each one. Give yourself at least a handful of options so that you can compare estimates.

Compare Coverage Offerings

Premium prices alone should not be the basis for your policy selection. Though you want to find the best deal, you also want to purchase coverage you can count on. So take a hard look at each policy's limits, inclusions, and exclusions.

The limits should be high enough to cover extensive property damage or a drawn-out liability suit. Double check for legal defense coverages on your liability plans. And whatever you do, be sure you always read the fine print before signing anything!

Choose an Appropriate Deductible

Lastly, let's talk about your deductible. This is the out-of-pocket expense you'll pay before your insurance coverage kicks in for a claim. Typically, lower deductibles are paired with higher premiums, and vice versa. Though you may be tempted to take on a higher deductible to cut down on your annual premium, be warned: that could end up costing more in the long run.

Before you make your decision, consider how often you may actually face a claim. Then consider whether or not you could spare that deductible cost at any given time, multiple times a year. As a rule, your deductible should never be so high that it jeopardizes your personal finances.

Though this process is far from streamlined, it can be done. However, if you have enough on your plate running and growing your business, maybe this isn't the route for you. If that's the case, let's take a look at the approach that will save you time, effort, and stress.

Next: Part 2: Finding Small Business Insurance with an Insurance Agent

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