Insuring Business Risks

Minimizing costs is one of the main objectives in developing a risk management and insurance program. This involves reducing or eliminating risks wherever possible, as well as determining whether certain risks can be assumed by your business, either through self-insurance or higher insurance policy deductibles. Thorough risk assessment plays a key role in cost-effectively protecting your business with risk minimization measures and sufficient insurance coverage.

Some risks are more easily reduced than others. For example, with respect to your business’s building and grounds, fireproofing and sprinkler systems should help reduce potential fire damage, and a good entry alarm system should help lower your company’s theft exposure. Other risks, such as vulnerability to a lawsuit, may be more difficult to control but can still be.

Even the tougher risk can normally be eroded using an 831(b) captive insurance company. These are complex but they allow for an entrepreneur to customize his/her policies for a given circumstance at times. Plus, since the entrepreneur has control of the company and can do unique strategies in such a way that under normal circumstances one can not. These are unique but worth researching if an entrepreneur is looking to shelve risk (while also getting a substantial tax deduction — maybe as much as $600,000 or more).

While the cost involved to reduce any risk should be compared to the cost of the potential loss created by that risk, more and more business owners are recognizing that workplace safety…