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Protecting your business is one of the most important things when running a company. Each industry has risks; in fact, every business has its specific risks. One of the best ways to protect your business is by purchasing business insurance(s).

The risks could relate to liability, employee, cyber, management, property, etc. Business risks can seriously impact any business due to financial and reputation damage. The proper business insurance portfolio can help deal with these risks and the negative outcomes.

However, there is much to consider and analyse before purchasing business insurance. Every business worldwide must consider factors to ensure they buy the proper policy. Your business could have multiple insurances and still suffer due to insufficient or improper coverage.

Many companies purchase insurance without thinking, reading or analysing, resulting in policies that can’t protect them. Hence, the article will highlight things to consider before purchasing business insurance.

What To Consider Before Purchasing Business Insurance?

Research and Analyse Industry Risks

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It’s great to be an optimist as a business owner, but there are points you have to be as realistic as possible. These points will help business owners and managers truly understand the possible risks.

Every company needs to understand its industry and company risks. It must analyse what could go wrong at any point in its operation. These risks include internal and external threats that can result in lawsuits and damages. All businesses have a unique set of risks that differ depending on the country, industry, and size of the company.

Thorough research and analysis can help a company list its risks and look for policies that cover them. It is one of the most important factors to consider before purchasing business insurance. The worst thing a business or professional can do is purchase insurance that does not match its risks.

It is the first and most effective step of risk management to protect your business from the worst situations in the future.

Insurance That Is Legally Required

Companies must understand the laws and regulations when running a business in a certain location. Every country and city has different requirements from companies. These laws are essential to follow to avoid legal trouble.

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For example, in Hong Kong, employee compensation insurance is mandatory when hiring even a single employee. In addition, each industry has its own regulations and may need specific guidelines to operate. The laws and regulations may even apply to professionals and freelancers in different sectors.

Hence, it is an essential aspect to consider before purchasing business insurance. Companies and professionals must recognise local or even international mandatory insurance requirements and purchase these insurance as soon as possible.

Purchasing and renewing mandatory insurance at a suitable time can help avoid hefty fines and business interruption.

Review Current Business Insurance

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Insurance is essential when running a business. Most policies provide a year of coverage and expire. A company is responsible for renewing its insurance in time to avoid a period without coverage. However, there is a high possibility that your policy may need updates and a review.

When renewing business insurance, there are many things to consider. Over a year, a business may have changed in size, products, international reach, and more. Every time a company grows, so do its risks. There is always a chance that the current or expiring policies will not cover the new threats.

For example, if a company has started selling products to clients internationally, you may need to increase your product liability insurance coverage limit and purchase trade credit insurance.

Hence, companies should examine their business growth and current policy before renewing their insurance. An updated policy will ensure that as their business grows, their risks will still be covered.

Prioritise Protection Over Costs

There are thousands of policies out there that can provide basic coverage at a cheap cost. These options have a cheap premium as they may not be capable of covering expensive and complicated risks.

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Insurance premiums can seem expensive; however, high-quality coverage typically reflects the costs. The cover is worth the premium and a fraction compared to the loss of a lawsuit or severe damages.

As a new business owner, going for the cheaper option is always tempting, as you try to limit fixed costs, but in the future, it could be a decision one regrets. In addition, this doesn’t mean a company has to go for the most expensive policy.

The right amount of coverage will always be worth it in the long term, especially liability and property insurance covers.

Read Policies Thoroughly 

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Every insurance policy has detailed wording that accurately describes what is covered and what is not. A common mistake most companies make is purchasing insurance without reading and understanding the policy statements.

Company owners and the appropriate department should know almost everything about the policy before purchasing business insurance. Reading the policy before signing can ensure that it is what the business needs and covers the intended risks effectively. 

Detailed knowledge of business insurance assists in picking and comparing policies. It also helps deal with unfortunate situations quickly, as companies will know they are protected when faced with a business risk. 

For example, if clients sue the company for misrepresentation, they will know they are protected by professional indemnity insurance. They will know the insurance will cover legal and possible settlement costs when there is an in-depth understanding.

Communicate Honestly with Insurance Brokers

Various insurance providers provide similar but different versions of the same policy. The cover and premium price may differ depending on the insurance provider. One provider may not be the best fit for all businesses, which can make purchasing business insurance complicated.

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One thing a business can do is use an insurance broker company. Insurance brokers are intermediaries that have partnerships with various insurance providers. They have a high level of insurance knowledge in multiple industries and countries. 

Businesses should be honest with their insurance brokers to provide the correct details about specific risks and needs. This information lets insurance brokers recommend the best insurance provider and policy for specific risks and businesses.

At Red Asia Insurance, we deal with and help clients from different industries and provide each with the best policies that fit their company’s risks. Working with us can reduce insurance stress, as we partner with many local and international insurance providers.

 It’s the best option for new companies or firms unclear about the numerous options.

Why Purchasing the Proper Business Insurance Is Crucial

Many business risks and threats are unavoidable, no matter how careful a company is. The right combination of insurance is vital to protect your business, liability, assets and more. Purchasing business insurance can be done before and during company operations. 

The main purpose of insurance is to help deal with financial loss linked to risks. The financial cover can save a company thousands to millions in losses. Therefore, a business can recover without a monetary interruption and continue its operations normally.

Proper business insurance can also provide peace of mind. Companies and professionals can focus on their business activities without worrying about uncontrollable lawsuits or damages.

However, companies should ensure they have the right insurance and understand the exclusions. Every insurance policy has unique and clear exclusions; for example, all policies will not cover any loss, lawsuit, or damage due to criminal activities.

Evaluating and considering before purchasing business insurance can help companies understand their risks and choose the right policy.



To Learn More about insurance and things to consider before purchasing business insurance in Hong Kong and Asia, contact Red Asia Insurance.