What Not to Cut

Cutting back during these difficult times has become necessary for consumers and businesses alike.  Every expense is scrutinized and debated.  Businesses are also asking themselves hard questions and cutting back on all expenses, hoping to become leaner operating machines able to survive this rather frigid economic environment.

This is often more easily accomplished by larger businesses that tend to have a little “fat” that always needs trimming.  It is a more difficult for small businesses and sole proprietors who, in most cases, are already running a tight ship, with little extra that can be cut.  Thus, many necessary tools of doing business come under the proverbial knife such as advertising, travel and office operating expenses. 

Insurance, especially liability and workers’ compensation is one such area closely examined by many businesses.  Depending on the business, liability and workers’ compensation insurance can be quite costly to maintain, spurring the question, “Do I really need this?”  While tempting to eliminate, you may want to think again.

Ask yourself a few hard questions:

• If you eliminate your liability insurance, what kind of risks are you potentially exposing your business to should there be an accident involving a product you created/distributed?  What if that defective product resulted in an injury or death?
• Do you have the cash on hand to handle any potential exposure?
• Can you and your business survive the fallout from any resulting lawsuits and/or settlements?

If you cannot survive such an event, and most small businesses and sole proprietors cannot, cutting back on your insurance coverage is not the way to go.

You should however take the time to review your current policy and shop around. Often, we become complacent staying with the same insurance company or assume we are getting the best rate because we have been with that provider for a long time. This is not always necessarily the case.

There is likely a large gap between what you are required to carry by law, what you should carry, and what you need to carry in terms of insurance coverage. Talk to your state insurance commission about what you are required to carry and then speak to a few insurance agents and brokers familiar with your type of business who can advise you as to what you should carry for coverage.

This is one situation where if not handled correctly, the cost of cutting back could potentially outweigh any benefit you may receive from cutting back.

About the Author

Over the past four years, Diana has worked with over 50 businesses and entrepreneurs worldwide. As a consultant, she specializes in assisting entrepreneurs in creating successful businesses or in revitalizing existing ones. More information is available on her website, www.dhbivona.com. ©Diana Heeb Bivona. Reprint Rights: You may reprint this article providing the article is printed in its entirety; you include the author’s name and website link, & do not edit the article in anyway.

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