No small business is immune to insurance risks. In fact, a recent AdvisorSmith study of 1,000 small business owners found that three in four respondents experienced an insurable event in 2020. In Hawaii, small business owners face daily risks, from thefts and burglaries to fire damage and liability claims. Understanding how to manage these risks to avoid a financial crisis can keep businesses running smoothly.
Implementing the right risk management strategies can help mitigate potential damage from insurance risks. Follow these tips for effectively managing common risks with Hawaii small business insurance.
1. Be Proactive About Risk Management
Do not wait until an incident occurs to get small business insurance. While not every small business needs every type of policy available, nearly every business can benefit from carrying the essentials.
Start by identifying risks by performing a small business risk assessment. Write down a list of risks the business may face, including internal and external risks. For example, an internal risk may be an employee injury or losing a key person. An external risk may be a market change or natural disaster.
Businesses must also consider the impact of financial risks, such as losing major clients or experiencing insufficient cash flow. Reputational risks, such as receiving too many bad online reviews, could also negatively impact a small business.
2. Secure Legally Required Policies
There are two main types of small business insurance: optional policies and those required by law. In Hawaii, the following types of small business insurance are required on every island:
- Workers’ Compensation Insurance– Hawaii state laws require any business with one or more full-time or part-time employees to carry workers’ compensation insurance. This policy covers medical expenses for work-related illnesses and injuries.
- Commercial Auto Insurance– Any Hawaii small business with business-owned vehicles must have commercial auto insurance. This policy covers the cost of collisions or other accidents in work vehicles. Trucking companies may require additional coverage to comply with regulations.
- Temporary Disability Insurance– Hawaii is just one of five states that require employers to obtain temporary disability insurance (TDI). This policy provides wage replacement coverage for employees forced to take time off work due to non-work-related injuries or illnesses, including pregnancy.
There may also be instances where small business insurance is needed to lease a commercial space or comply with contract requirements.
3. Get Coverage for Common Business Risks
Despite a business’s best efforts to avoid insurance risks, there is always a chance that an unexpected incident will occur that puts it at risk. To best manage risks in any industry, consider acquiring coverage for the following common small business risks:
- Property Risks– Every small business owner can benefit from carrying commercial property insurance. Standard property insurance policies cover all business property and various assets such as inventory, equipment, supplies, computers, and proprietary data.
- Cyber Risks– While many small business owners focus on preserving their tangible assets, it is also important to protect digital assets. From data breaches to computer systems attacks, cyber insurance can help businesses better safeguard their data and recover faster after cybercrimes.
- Liability Risks– Liability risks have become more common in today’s litigious society. General liability insurance can help protect Hawaii small business owners from third-party claims, such as customer slip-and-fall accidents, on business premises.
4. Understand What Factors Can Impact Insurance Rates
Many factors can impact a small business’s insurance rates, from location and size to the assets it wants to insure. Other factors, such as years in the industry and claims history, can also affect how premiums are calculated.
While some factors that impact insurance rates are beyond a business’s control, taking certain steps can help keep premiums down. For example, businesses should not allow their insurance policies to lapse. Having breaks in coverage can sometimes cause premiums to rise.
There are also ways to reduce the cost of certain types of insurance. For example, some businesses can reduce their commercial property insurance rates by installing security systems and fire suppression systems.
It is also important to make strategic decisions to keep insurance costs low. Do not allow employees who have poor driving records to operate business vehicles. Employees without adequate training should also not be allowed to operate heavy machinery.
Get Help Managing Risks with Atlas Insurance Agency
Buying small business insurance to protect against common business risks can be confusing. If you need guidance on choosing the best insurance for your Hawaii small business, count on the experienced insurance agents at Atlas Insurance Agency for assistance.