Owning a small business can be challenging, but a properly crafted insurance portfolio supplies small-business owners with valuable peace of mind. While most small-business owners have insurance policies designed to benefit their organization, these existing policies can often fall out of date as a company grows and circumstances change.
Without regular adjustments, a business’ insurance portfolio can fail to provide owners with the monetary resources they need in a crisis. Financial professionals should take time to conduct regular policy reviews with their small-business owner clients. During these reviews, producers can discuss the following issues and tweak clients’ insurance plans to provide solutions.
Coverage becomes inadequate
In many cases, an organization’s insurance coverage will be outpaced by the firm’s success. Certain business agreements, like a buy-sell arrangement, are structured around a company’s value when the agreement is created. Disability or life insurance provides a simple way to fund the execution of a buy-sell, but these insurance policies may become inadequate over time. An imbalance occurs because the amount of money the policy provides does not increase alongside a company’s value. Owners who fail to update their policies in tandem with their business’ performance might be in for a shock when their policy fails to cover their financial needs in a moment of crisis.
Potential cost benefits
Even if a business’ financial standing is largely unchanged, regular policy reviews are a necessary part of relationship building for financial professionals and their business owner clients. Newer policies can often provide substantial cost savings over older policies, which can be a boon for business owners who are understandably focused on the bottom line. Speaking with clients about potential cost savings allows a financial professional to build trust, and can lead to additional potential sales in the future.
Planning for the future
Many business owners have difficulty speaking about succession. Policy reviews give financial advisors the opportunity to address these issues within the framework of insurance coverage that will ease the eventual transition. The Journal of Accountancy noted these topics should be covered in a policy review, and highlighted the need for this type of plan to change over time.
What a business owner wants for the future of their organization is flexible, and likely to shift as the business grows and evolves. A successful succession plan changes with the business, and regular policy reviews give ample opportunities to adjust a plan according to changing needs.
