Choosing an insurance policy might seem a simple task: you simply assess the risk, gauge the premiums and buy the product. However, buying insurance in today’s market has been compared to buying a personal pension in terms of its complexity. All insurance is measured by risk, generally the higher the risk the higher the premiums.

It is important to keep this in mind when looking for any kind of insurance. What you might think of as relatively risk-free might not show up that way on the actuarial tables.

Issues to consider:

  • Try to accurately assess the risk you are insuring against. It is a surprising fact, but many companies either over-insure, so paying for cover they don’t really need, or under-insure so finding themselves exposed when disaster strikes
  • Take account of changing circumstances. Risk, like everything else, can change with time, for example, as equipment ages, as the company expands into new activities, or as the crime rate increases
  • Always write down exactly what sort of cover you are looking for and make sure you stick to it; do not be talked into a policy that you do not need
  • Consider dealing with an insurance broker but, if you do, realise that you might have to pay a commission
  • Consider buying an insurance package whereby you insure several items at once. This is almost always cheaper than buying individual items but does run the risk of involving an insurer who may not be experienced in all areas
  • Insurance is offered by a myriad of financial institutions, far beyond the old specialist insurance companies. You will be spoiled for choice

Insurance is a necessity of business, although employer’s liability insurance is the only compulsory policy you must have. All insurance costs money and it is therefore wise to regularly review your insurance cover.