Why is an Insurance Lapse so Bad for Business?

Why Is an Insurance Lapse So Bad for Business?
Small-business owners have a lot on their plates. Managing multiple moving parts, wearing many hats, and juggling the responsibilities of work and home can prove challenging.

In the midst of all this, something may occur that shouldn’t: a lapse in insurance coverage.

Whether the premium payment was overlooked or other circumstances caused the owner to cancel a policy, when there is a lapse in coverage, the business is left without insurance protection.

This isn’t a good thing. In fact, it can have serious repercussions. Four of these consequences top the list.

1. No net. While a tightrope walker can perform without a net, it’s risky. The same goes for business owners, although the risk is usually even higher. When insurance lapses, the business is left with no liability coverage, no property insurance, and no funds for defense during litigation. One incident without insurance to cover the costs could potentially close the company’s doors forever.

2. No discount. In most cases, businesses can receive a continuous coverage discount for maintaining constant coverage. Avoiding any lapses demonstrates stability to insurance companies, and they reward it with better rates. If the business experiences a lapse in coverage that lasts more than 30 days, this discount is usually lost.

3. No long-tail coverage. Maintaining constant coverage with the same insurance company offers advantages. One is long-tail coverage. If you carry a liability policy that includes a standard completed operations portion, the work your company performs is typically covered for the entire duration of the policy.

For example, if you opened the policy four years ago and you are sued for something that happened three years ago, the liability policy will kick in, even if the project in question is not a current job. If you experience a lapse in coverage, you will no longer be eligible for this long-tail coverage.

4. No reputation. A lapse in insurance coverage can hurt the reputation of your business with insurance underwriters. Since most small-business coverage is handled on a case-by-case basis, the underwriter must decide in each situation whether a business is a good fit or worthy of risk. If they see a lapse (or multiple lapses) in coverage, underwriters will be less likely to want to extend the coverage to the company. This can mean denial of coverage or higher premiums.

There may be some situations in which a lapse in coverage seems entirely appropriate, such as for seasonal businesses. However, it’s important to weigh the consequences of this lapse with the benefits of maintaining continuous coverage. And for those who may believe that a lapse in coverage is “no big deal,” it’s important to remember the risks involved when running a business without protection.

To keep insurance coverage in place, try not to think of it as an expense. It is a necessity. By avoiding any lapse in coverage, you’ll set your business up for better savings, smoother operations, and greater success.

We’re here as your resource and are happy to answer any questions you have about continuous coverage and how it can benefit your business.


HOT BIZ TRENDS
Ready to Grow? Here’s How to Manage Multiple Locations

Even the smallest of businesses may have multiple sites and employ people at various locations. Managing disparate locales can present challenges, yet it is important to maintain consistent standards of quality, service, and professionalism and to foster team allegiance throughout the organization.

If you do not work with or even see your employees on a regular basis, there is little opportunity for natural or unplanned interaction. This makes communication essential. Conduct weekly team meetings via phone or webinar and use these occasions to emphasize safety protocols, reinforce business priorities, discuss progress toward stated goals, and share news about the industry and the company. Make it a point to visit each site regularly and try to get the entire group together for trainings, updates, and team-building sessions once or twice a year.

Put systems in place to delineate roles and responsibilities as well as clear decision-making protocols. Establish specific, quantifiable performance metrics that are aligned with the company’s goals (key performance indicators or KPIs) and measure performance at both the site and individual levels. Hold all employees accountable for delivering on their KPIs, regardless of where they are based.

Take advantage of technology to facilitate communication, skill-building, and administrative tasks. Some of the best and most cost-effective training communication and management tools commonly used by small businesses include Google Docs, Gmail, and Google Calendar; Basecamp; Salesforce.com; and Skype. Most of these tools are affordable (or even free) or are available on a subscription basis.


CUSTOMER RELATIONS
Psychological Secrets to Customer Retention

Psychology plays a key role in the purchase decision-making process, and you can use this fact to boost customer retention.
One approach is to take advantage of a trigger known as FOMO, or fear of missing out. FOMO is a powerful psychological motivator that stems from basic human survival instinct, the fear that something is going to be gone, finished, or over before you get to it. You can apply FOMO by presenting your customers with limited-time offers. When customers sign up with their email address, incent them to become repeat customers by sending exclusive, limited-time repeat customer specials.

Social proof is another psychological principle you can employ to bolster customer retention. Social proof refers to the reaction people have when they see other people enjoying something or benefiting in a way that sparks desire or envy. Shares, links, testimonials, tweets/retweets, and positive online reviews can serve as social proof points.

You can also use psychology to help your customers rationalize their purchases and feel good about the purchase experience. Sending personalized thank-you texts or emails tells customers that you value them and their business. Following up with advice on how they can get the most out of their product and offering special incentives reinforces the positive message and fuels repeat sales.

As you shape your marketing strategy and develop your retention methodologies, keep in mind that using a little psychology can encourage customers to remain loyal and transform first-time buyers into lifelong customers.


INSURANCE
Key Personnel Insurance: What Is It and Who Needs It?
Is the success of your business dependent on a single person or a key group of people? Could your company survive without you or other leaders?

Many small businesses would suffer greatly from the death of one valuable employee. This is where key personnel insurance comes in.

If a company could face closure after the loss of an important employee, key personnel insurance can provide the financial stability for the business to survive this loss. In instances where it is not feasible for the company to go on without the key employee, the funds from this policy can provide severance to employees, funds for investors, and a budget to close the business smoothly.

This coverage is available in two forms: key person life insurance and key person disability insurance.

The life insurance policy pays the business if the key employee dies. The funds can be used to pay off debts, buy out surviving shareholders, cover costs of replacing the employee, and provide for revenue that is lost due to the employee’s absence. The policy can be set up as term or whole life insurance.

The disability policy provides funds to the business if the key person becomes unable to work, either entirely or partially. Rather than pay the employee as typical disability insurance would, the policy provides funds for the company to compensate for lost revenue or to hire a replacement.

The amount of coverage for either policy should be based on the key person’s income and the portion of the overall business revenue that this reflects. These funds could provide the lifeline a company needs to survive a significant employee loss.