Commercial insurance is one of the few products that you purchase for your small business that you never want to use. Because when you do, it means something bad has happened. But you still should know how to use your business policy when crime, fire or certain other problems strike.
The process of filing business insurance claims can be tricky, but when you understand it, you can make it work for you and your company.
Here are 11 tips that you should learn now (or just bookmark) in case you need them later:
Before trouble hits
Long before trouble strikes, there are steps you can take to make the claims process go easier. They may sound simple, but too many entrepreneurs make costly mistakes by overlooking the obvious.
- Familiarize yourself with your policy so you can learn what's covered and what isn't. For example, flooding isn't covered by standard business property insurance. You'll need a separate flood policy for that.
- Store a copy of the policy, along with your provider's contact information, offsite so you'll have easy access in case of devastating fire or other disaster. When you contact your provider about a loss, you'll need your policy number and policy start and end date.
When the loss occurs
Regardless of whether the loss came from a crime, fire or weather-related disaster, you should address it quickly. Even a small delay can lengthen the claims process.
- If you're the victim of a burglary or other criminal activity, file a police report right away. Burglary and theft are the most common claims filed by small businesses, according to a study by The Hartford. Once you're done with the police, contact your provider. If the loss is from fire or a covered weather event such as hail or wind, contact your carrier immediately and proceed with the claim.
- Take photos to document any damage resulting from the claim. Make a list of damaged inventory, equipment and anything else affected by the incident. Do not dispose of damaged goods; the insurance adjuster likely will want to evaluate them.
- Start your own claims file so that you can keep track of what's been done. Make sure you use the claims forms suggested by your provider, and copy all supporting documents before you turn them in. Schedule a series of follow-ups with your provider, beginning a week after you file the claim, so that you can monitor progress.
- Make temporary repairs to keep losses from getting worse. For example, cover holes in the roof with a tarp or board up broken windows. But do not begin permanent repairs until you get approval from your carrier.
- Get multiple bids to repair or replace your losses so that you'll have a better idea of fair compensation.
Related Article: 9 Ways to Save Money on Business Insurance
After you file the claim
Yes, you've filled out the paperwork involved with filing a claim, but just turning that paperwork in doesn't mean you're done with the process. You still need to communicate with your insurer (see tip #5) to make sure you get the benefits to which you're entitled.
- You likely have business interruption coverage. If your business has to close for any length of time after the incident leading to the claim, you could be compensated for the loss of income during that period. You'll have to document your losses, show the company's income before and after the incident. Don't forget to include such ongoing expenses as utilities and advertising while you were closed. If you moved temporarily while awaiting repairs, keep records of your extra operating expenses.
- Consider hiring a claims accountant, also known as a public loss adjuster, to investigate and document your claim. This third-party investigator can help if you're having problems resolving the claim with your provider.
- Get an advance on your claim. Many providers will recognize your need for advance cash to help you start to get your business back in operation. Be careful, however, that you're getting an advance, not a final settlement.
- Always communicate in writing. No matter how careful you are, misunderstandings can arise, especially in the emotionally charged atmosphere after a loss causing you to file a claim. To minimize these disputes, communicate in writing when you can. If you get important information during a phone call with your provider, write an email listing the details and ask the carrier to confirm both the receipt of the information and to confirm your understanding of the conversation.
With solid preparation, the process should run smoothly. Remember one last thing, however; you don't have to accept the first settlement offered by your provider. Get legal advice before signing anything, you won't get a do-over.
In a best-case scenario, you'll never have to use your policy. But if you must call on it, be sure to make it work for you.