Insurance · September 09, 2021

How Can You Reduce Your Insurance Policy Payment?

Not only does insurance inspire greater peace of mind, but it's often necessary for small businesses. Whether you're taking out liability or auto insurance for the company or providing insurance for your employees, it's an inevitable expense for small businesses. However, the cost of monthly premiums can quickly mushroom if not managed effectively, challenging that peace of mind.

How can you reduce your insurance policy payment so it doesn't eat up too much cash? Here are five strategies to consider.

1Bundle policies

As a small-business owner, you can save a significant amount of money by bundling your commercial auto insurance with general liability, errors and omissions, and worker's compensation insurance. You can also bundle health, dental, disability and life insurance to save money for both your firm and your employees.

Purchasing from one integrated vendor generally doesn't provide cost transparency or actually save you money, but utilizing one insurance agency or broker can. Shop around and obtain quotes from multiple agencies. You may find the best overall deals getting insurance from multiple providers purchased through one entity: the agency. This can have the added benefit of reducing administrative oversight and paperwork, too.

2Participate in a professional employer organization

Participating in a professional employer organization, or PEO, lets you outsource most of your human resources administration, which includes benefits administration. PEOs' fees often include workers' comp coverage and the associated claim administration, which takes care of that expense.

More significantly, the right PEO can offer access to high-quality employee benefits at highly competitive group pricing similar to that provided to large corporations, given that PEOs manage hundreds to thousands of employees. Thus, your small business can offer higher quality health, dental and other types of insurance at better rates, allowing you to pass on savings to your employees in the form of lower co-pays or lower deductibles. Or, your firm may be able to absorb more of the premium cost and charge employees a lower monthly premium.

3Increase deductibles

According to the Kaiser Family Foundation, covered employees paid an average of 18% of premiums for single-person coverage and 30% for family coverage. If you'd like to increase this percentage, you can do so by increasing deductibles for applicable insurance. Because many claims fall below a certain dollar threshold, raising the deductible to closer to that threshold will reduce your cost.

Of course, one unfortunate side effect of doing this means that the overall cost of insurance will be higher for employees who often utilize their insurance. However, the Society of Human Resource Managers provides some ideas on how to offset the overall higher costs for such employees. For example, you can add virtual options, such as telemedicine or nurse advice lines. Another option is to utilize Health Savings Account (HSA)-based plans to offset the deductibles and educate your employees about how they can use an HSA to pay medical bills with pre-tax dollars.

4Pay in advance

Without actually changing insurance policy limits and deductibles, another way you can potentially reduce costs is through advance payments or payment in full.

Insurance providers typically embed financing and administration costs into their monthly premiums, and these costs can add up to a significant percentage of the total premium. While paying for a whole year may overtax your cash flow, paying in advance with quarterly or semi-annual lump sum payments may be in the budget and can still greatly reduce what you pay overall.

5Reduce risk

One proactive step you can take to reduce your employees' insurance costs is to reduce risk in the workplace. Interactive workplace safety programs with the team and individual incentives can drastically reduce workplace incidents, thus reducing the cost of your workers' compensation and general liability insurance.

Although office wellness plans typically have little impact on the overall insurance costs for small businesses due to the lower number of employees, implementing one may still be a viable option. A wellness plan can indirectly decrease your overall costs by reducing the amount of sick leave and short-term disability your employees need to use, as well as by increasing overall productivity.

With both of these options, you would also be passing savings on to employees by reducing their out-of-pocket healthcare costs.

So, how can you reduce your insurance policy payment? As you can see, there are actually a number of possible options. Some offer direct cost savings, while others provide avenues to indirect savings by lowering your firm's costs elsewhere, providing savings for you to pass on. Either way, these strategies can help you prevent insurance premiums, deductibles and co-pays from eating into both your firm's cash and your employees' paychecks.


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