Whether you deal with an independent agent or insurance broker, or work directly with an insurance company, be certain that you've done some comparison shopping before you sign up.

Just as you cannot always buy your business products from a single supplier, you can't always buy all the insurance you need from one carrier. Your goal is to outfit yourself with adequate provisions and seamless protection--coverage which as no gaps.

Depending on which type of insurance you are purchasing, various determining factors will affect your insurance premium. For life insurance, your age, sex, health and family health history are al factored in to determine your rates. Regardless of your health, if your family has a history of heart disease, your rate may be slightly higher. Do not misrepresent this information, as the entire policy could be invalidated if you have presented anything less than the truth on the application.

Auto insurance rates are determined by the type of car or truck you drive, how old you are, whether or not you are married, the number of drivers using the vehicle, how long you have been in the state, and the number of miles you drive to and from work each day.

Property insurance rates will vary based on the location of your building. Figures on the local crime rate, your industry group, and the condition of the building are all computed into the final rate you are quoted.

Regardless of the type of insurance you are purchasing, as long as you take the highest deductible you can afford, the premium should be within a manageable range. Considering that you can usually get coverage for one to two percent or less of the total coverage, that is a bargain.

Your application for insurance is evaluated by the firm you have contacted. After processing, a firm price quotation is given. Auto insurance quotes can normally be give on the spot. Life, health and property insurance rates may take the insurance representative longer to study. Be aware of this lag time if you are considering changing policies.

Insurance firms are somewhat flexible with payments. Premiums for many policies are due every three months. You can pay monthly, but there is a slight surcharge for this arrangement.

Life insurance policies with a cash value often have provisions in which late payments are automatically deducted from the value of the policy. House payments and new-car payments sometimes have the insurance premiums automatically added. Direct-deposit arrangements are possible in some circumstances.

Aside from understanding the insurance industry, become familiar with the terminology used in your policy.

The Insurance Information Institute of New York offers a handy guide to risk management entitled Sharing the Risk that makes the typical policy much more readable. The book explains the four basic sections of the insurance policy as follows:

  • Declarations page. This names the policyholder, describes the property or liability to be insured, states the coverage, and specifies the maximum the insurer will pay in case of loss.
  • Insurance agreement. This describes both sides' mutual responsibilities while the policy is in force. Often this section will tell the policyholder when, how and why claims should be filed and the insurers alerted.
  • Conditions of the policy. This spells out in detail what is covered and what is required of both parties in case of a loss.
  • Exclusions. This lists specific perils, property and losses that are not covered.

A fifth section--endorsements and coverage expansions, is added to show coverage allowed, but not standard.


Excerpted from The Small Business Encyclopedia, Start Your Own Business and Entrepreneur magazine ("Needs to Know"). All information is intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an insurance agent.