Year In Review
When's the last time you looked over your company's insurance policies? You should review your deductibles annually, advises Tricia O'Connor, CPA and president of Total Service Accounting, a Denver accounting firm that also provides business consulting.
O'Connor estimates that 95 percent of her clients aren't familiar with their insurance deductibles or don't know how they can affect the cost of their insurance policies until she shows them how they can save money by paying more attention. "Most clients never ask about deductibles and end up with whatever the agent thinks is appropriate," says O'Connor. "The trouble is, your agent isn't necessarily interested in saving you money on your premiums."
You can think of insurance as a disaster safety net, rather than a way to protect yourself from minor inconveniences, says O'Connor. For example, your auto insurance should be reserved for when a car in your fleet is totaled, not for when you lose a headlight in a parking lot accident. Health insurance should be used to protect you from the cost of catastrophic illnesses, not common colds. Be sure to adjust your deductibles accordingly.
Invest part of your premiums savings into an `insurance' fund that can cover deductibles from the in-terest it earns, and you'll save on premiums, incurring no added expenses from paying deductibles out-of-pocket.
Claire Tristram is a business and technology writer in San Jose, California.
The surge of rising health-care costs.
This year, entrepreneurs will be hit hard by increases in health insurance premiums. In fact, benefits consultants are reporting rates for many small businesses will increase by as much as 50 percent in 1999.
How are small businesses affected by health insurance inflation? If you have 10 employees and just two of those employees have babies in the same year, 20 percent of your employees will incur major hospital bills. That's a significant increase in the claims you file that year. Insurers typically compensate for the unpredictable nature of small- business claims by charging hefty premiums.
Entrepreneurs can fight this inflation in a number of ways. First, you can stop offering health insurance. With today's squeezed labor market, however, this option could knock you out of competition for top-notch employees.
Another choice is to join a health insurance purchasing alliance that pools your insurance needs with other entrepreneurs in your area, thus reducing policy costs for each participant. To locate alliances in your area, contact your local chamber of commerce or your state's insurance department.
You can also ask your employees to share part of the burden. "Many may be covered by their spouse's policy," says Barry Schimel, president of The Profit Advisors, a Rockville, Maryland, business consulting firm. "They'll drop the plan if you ask them to pay even a small amount, and you'll still be offering coverage to the people who really need it. Everyone wins."
What is an "act of God," anyway?
Do you think "blanket insurance" covers goods stored in your linen closet? If so, there's help available for you or anyone who's ever had trouble deciphering unfamiliar insurance lingo. Log on to the Web and surf to http://gen.insweb.yahoo.com/general/ref/general-master.htm There you'll find a lexicon of insurance terms--from "AABD" to "Zone System"--with sub-lexicons covering special terms that regularly appear in auto, life and health, and property insurance policies.
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