Now is Not the Time to Drop or Lower Your Coverages
By Foster Park Brokers Inc. - Posted on Monday, May 9, 2016
The economy is still reeling and employers continue to experience budget pressures. The first reaction is always to cut back, and in some instances, this can be a wise decision. But one area that should never be impacted by the budget is insurance coverage. In fact, when budgets are tight, having proper insurance coverage is more important than ever.
Insurance Based on Budget
Dropping or lowering your coverage may seem like a smart or even necessary move when faced with low funds. However, dropping or lowering coverage exposes your company to the risk of greater financial hardship when you can least afford it. If you don't think you can afford insurance coverage, then how could you possibly afford a claim or loss? Right now would be the worst time for a significant business interruption or financial hardship—it could be catastrophic for your company.
A smarter option may be to increase your coverage. For many commercial lines, the prices are currently very low, so it could be an optimal time to purchase more coverage. In addition, underwriters do not like to see gaps in coverage. If you drop or lower your coverage now due to monetary concerns, your premiums may well be higher when you resume your normal coverage level.
Not only does lowering coverage expose your company to greater risk from a claim, it can also expose your company to possible lawsuits. For instance, if you lower and raise your coverage level year to year based only on price and then have a claim for which you aren't fully covered, shareholders or claimants could sue you for negligence because the company did not have a strategic risk management program in place. Employers should develop a risk management plan that is based on what their company needs and is applicable to all lines of coverage, and it is important to follow the plan regardless of budget.
Certain types of coverage, such as employment practices liability (EPL) and directors and officers insurance (D&O), become even more vital in a tough economy. If your company is laying people off, there is always the risk of someone suing for discrimination or wrongful termination—this makes your EPL coverage essential. Or, if the company takes a big loss or is struggling, shareholders and stockholders are likely to blame the board of directors. It's important to retain appropriate D&O coverage in case of a lawsuit.
To discuss smart but viable ways to retain your coverage and protect your company, contact Foster Park Brokers Inc.