When you secure or purchase insurance, do you think about your risk? Most people think about one or two factors when buying insurance; premium and limits. Very little thought is given to the design of the insurance program or qualification of the agent. The result often leads to frustrated consumers who sadly realize, “My claim is not covered, or not covered completely.”
If you could understand your risk, and then design an insurance program that addressed your individual risk, you might be a more satisfied insurance buyer. That is why we recommend you develop a “total cost of risk” approach to insurance buying. Total cost of risk is the sum of the costs arising from all of the risks faced by an organization.
Change Your Thinking About Insurance
Most businesses only look at their premiums when they evaluate insurance costs. We would like to provide an alternative view. For example, by only considering insurance premiums, you are eliminating many other factors of your total insurance costs. Here are factors that make up your total cost of risk:
- Internal Risk Administration
- Legal and Claims Expenses
- Deductible Costs
- Uninsured Loss Costs
- Safety Program Costs
- Insurance Premiums
- Contracted costs
Most insurance policies can be designed with specific coverage added or removed, depending on the needs of the client. You might not have an exposure to a risk that is included in your insurance program, and by eliminating that, you might save money. Alternatively, you might want to self-insure some risks, so why pay the premiums.
The key is to use an agent who can educate you on these items, and help you understand that insurance should be designed with your needs in mind, not the insurance company.