Business insurance, also known as commercial insurance, helps protect companies from financial losses resulting from risks such as property damage, liability claims or employee-related incidents. In recent years, however, challenges such as recession fears, the pandemic, inflation and supply chain disruptions have reshaped the economic landscape, just as insurance premiums have climbed.

And while it may be tempting to trim costs by cutting coverage here and there, insurance remains essential — perhaps especially during periods of economic fluctuation.

The business impact of economic uncertainty

Businesses of all sizes face challenges when there’s economic uncertainty. That said, small and midsize businesses (SMBs) are often more vulnerable to consumer spending declines, supply chain issues, cash flow instability, regulatory changes, and labor market instability. SMBs could feel sudden pressure to reduce costs and protect margins when economic circumstances are challenging.

This isn’t to say that larger, more established companies don’t face their own challenges when the economy is bumpy. Indeed, they may be forced to lay off staff and curb pay raises. As with SMBs, they may find themselves having to cut budgets to stay afloat, even if they might have more access to financing.

Although finding cost savings is a responsible practice, it’s arguably best done with an eye on long-term as well as short-term considerations. For instance, slashing costs in a way that eventually results in higher expenses, as in the case of an incident or accident, might not be in the company’s overall best interest.

» Tip: Concerned that you might be paying too much for business or commercial insurance in the current economy? Consider getting a free quote from RBFCU Insurance Agency.

What does business insurance cover?

Insurance is a tool for protecting business assets, much like incorporating to limit personal liability, keeping business and personal finances separate, and complying with local, state and federal regulations.

Business and commercial insurance policies cover a range of scenarios and risks. Depending on how your business operates, you may need one or more of the following types of coverage:

• Business auto insurance can protect your company’s owned or leased vehicles in case of damage. It may also safeguard your business from medical or legal claims resulting from an accident.

• Commercial property insurance may protect you from repair or reconstruction costs resulting from damage to your business buildings¹ and contents resulting from theft, fire, natural disaster and vandalism.

• Directors and Officers (D&O) coverage could help reduce the risk of financial losses if your company’s leadership is ever sued over their business decisions.

• Errors and Omissions (E&O) policies are designed for professional service providers² such as contractors, attorneys and business consultants. E&O coverage can help offset the cost of litigation and settlements if a client sues your business due to an error.

• General liability insurance protects businesses³ against several kinds of claims, including bodily injury, property damage, slander and false advertising.

• Workers compensation policies cover some business and employee expenses related to injuries in the workplace, such as lost wages and medical bills. (Note: Although Texas is the one state that doesn’t require workers compensation coverage, a policy may be required by some companies or governmental agencies from whom you are seeking contracts.)

» Tip: For companies that need a mix of coverage, you might want to consider a business owners policy (BOP). By working with a licensed insurance agent, you may be able to bundle policies and save money. A good way to get started with a BOP? Request a free quote from RBFCU Insurance Agency by calling 1-888-564-2999 during regular business hours or emailing us now.

Aligning business insurance coverage with growth

Because each type of policy listed above addresses a different area of business risk, it’s easy to see why a company might need multiple policies to gain the most comprehensive possible coverage.

At the same time, reading those coverage types can also give you a better idea of what the financial consequences could be when reducing or eliminating coverage to trim short-term costs.

There’s also the issue of making sure your coverage keeps up with growth that might happen, yes, even in the context of economic fluctuations.

For example, let’s imagine that a business owner buys a modest warehouse to store inventory — after years of stashing it in a home garage — and adds staff to maintain it. Those are investments that could contribute to greater efficiency and growth.

However, if there is inadequate coverage in place and one of the company’s new warehouse workers trips and falls on the job, the company could be liable for medical bills as well as lost wages due to the injury and recovery time … and perhaps even a costly lawsuit.

Without proper coverage for the new warehouse and all activities in it, a single incident could create a major financial setback.

The potential ROI of business or commercial insurance

In the warehouse incident example, there’s also a potential threat to business continuity. If our imaginary employee filed a successful lawsuit claiming negligence on the part of the business, the costs could force the company to scale back operations or even close due to a cash shortage. And that could make an otherwise isolated incident become a major problem.

Fortunately, adequate business insurance can help companies stay resilient during unexpected events.

In fact, maintaining coverage to help guard against this type of disruption may prove less expensive than paying for and recovering from uninsured losses your business might incur. Some coverage can also reduce the amount that owners must pay out of pocket for legal and compliance-related costs.

For SMB owners and solo professional services providers, coverage can create a kind of firewall between professional and personal finances, so that business liability issues stay tied to the business.

Meanwhile, for larger companies, D&O coverage may serve as a safeguard for your leadership team, especially if they’re highly visible, well-regarded and affluent.

Proactive steps to take during economic change

Although reducing coverage or raising deductibles may not be advisable as cost-cutting measures, there are some insurance-related steps you should consider taking if costs are an issue.

Consult with a licensed insurance agent to assess your current business coverage.

An agent may be able to recommend changes to reduce your risk exposure and identify cost-saving options, such as bundling coverage with a BOP.

Review your business coverage at least once a year.

It’s also wise to consult with an agent before or immediately after business changes such as releasing new product lines, hiring more employees, or creating a partnership. Another good time to talk to them is whenever inflation or other economic factors impact the valuation of your assets.

» Tip: Already have coverage … but curious to see if you might be able to save a little money on the rates? Again, the RBFCU Insurance Agency team is willing to help with a free policy review and quote. To get started, simply call 1-888-564-2999 during regular business hours or email us now.

Build a rapport with your insurance team.

These professionals are ready to help you, so feel free to reach out when you have insurance- and risk-related questions. They can also keep you updated about insurance industry changes and rate fluctuations, so you can make better strategic decisions to protect and grow your business.

The takeaway

Business insurance can be a necessity — even during periods of economic fluctuation. That’s because it can reduce your exposure to risks that could have an even greater impact during periods of unpredictability.

Working with an insurance agency that shares the same values and vision as the credit union upon which you’ve come to rely, you can identify the appropriate policies and coverage amounts to support you and your company moving forward.

RBFCU Insurance Agency is here to help business owners and leaders get the right commercial insurance coverage at the right price. Call or request a quote online today.