Wood Products Insurance: 7 Purchasing Pitfalls
As with any insurance purchase, it’s important to know what to look for and what to avoid when purchasing insurance for your wood products company. Purchasing the wrong coverages, or not enough coverage, could cost you when a claim occurs. But, when you purchase the right policy with the right coverages for your sawmill, pellet mill, or other forest products business, it could save you a ton of headaches, lost time, and potentially money. This article discusses seven purchasing pitfalls to keep in mind while you shop for your wood products company insurance, and how you can avoid them.
#1: Simply purchasing the least expensive policy.
Insurance premiums for companies in the forest products industry vary from one company to another and between insurance carriers for good reason. No two sawmills are alike; their insurance shouldn’t be either. Different sizes, different construction of buildings, and different protections and safety features in place are just a few of the factors used to determine premium. On top of the differences between sawmills and other wood products companies, each insurance carrier is different. Some carriers have more experience insuring companies in the forest products industry. These companies will provide coverages more tailored to the industry, and their pricing will reflect the risk involved.
As appealing as a low premium may be, remember the old saying: if it seems too good to be true, it probably is. You may be missing important coverages or have significant restrictions and exclusions on your policy. Outside of the obvious coverage limitations, you may be working with a carrier who isn’t familiar with your business. Afterall, a sawmill or wood preserving operation is much different than a hotel or restaurant. This can create issues down the road, particularly from a loss control/risk assessment standpoint. This is a great time to enlist the help of a forest products industry specialist like Continental Underwriters, Inc. Check out our article about Specialists vs. Generalists.
#2: Purchasing too little insurance.
From a property and a liability standpoint, this can turn into a real problem for your business. By saving money on your insurance policy premiums you are potentially setting yourself up to be underinsured in the event of a claim. Know the value of your buildings, business personal property, stock, etc. and review those values on a regular basis. Consult with your financial team and use a Business Income Worksheet to calculate how much BI coverage you need. Carry at least enough liability coverage to satisfy any contracts you have in place with vendors and other third-parties.
No one expects a large loss, but natural disasters happen, as do lawsuits and accidents. If a hurricane hits your sawmill or if one of your employees is in a vehicle accident while transporting lumber, your policy limits could be exhausted quickly. Take the time now, before a claim occurs, to ensure you have the limits you need to get back up and running as quickly as possible. Your company and your employees depend on it!
#3: Automatically choosing the lowest deductible.
Deductibles can be considered a form of self-insurance. They let you, the policyholder, save money on premiums. They also make it possible for insurers to avoid the cost of adjusting small claims.
When purchasing insurance for your wood products business, don’t immediately select the lowest deductible (or the highest, for that matter!). A general rule of thumb is to choose the largest deductible you can comfortably afford. If it turns out that’s the lowest one, so be it, but always review your options and choose what is right for your business in the long-run and in the event of a claim. A larger deductible, within your financial means, can save you money that you can then invest back into your business and employees.
#4: Failing to adjust.
We have all heard it time and again – the only thing that is constant is change. And, if ever that is true, it’s now! Companies grow, businesses acquire new property and hire new employees, and industry markets change. When changes occur in your business, your insurance should do the same. If you aren’t keeping your insurance agent up to date on these changes, it could result in inadequate insurance coverage.
Whether it’s an increase in lumber prices that could impact your stock values and sales figures, or the acquisition of a new pellet mill, your agent needs to know what is going on with your business so your insurance policy can be updated accordingly. Even if you don’t experience any significant changes throughout your policy term, it’s important you meet with your insurance agent several months prior to your renewal to review your coverages and limits. Your agent may be aware of new extensions of coverage available for companies in the forest products industry, or they may notice a gap in your current coverage. It is always worth the time spent to ensure you have the coverages you need to get back up and running quickly in the event of a claim.
Item #5: Not reading your policies.
We know, we know. An insurance policy isn’t exactly the most exciting read. But, it is critical to ensuring you understand what coverages you have, what coverages you don’t have, and the actions you must take when a claim occurs. The last thing you need at the time of a loss is a coverage surprise. Take the time up front to review your policy. If anything is unclear, ask your insurance agent for help. And, if you find something is incorrect or missing, request an endorsement to your policy as soon as you realize it. At the time of a loss, it’s too late to make corrections and errors can cost you.
Item #6: Staying with the same insurer for too long.
Constant change isn’t limited to your company or the forest products industry as a whole. It goes for insurance carriers too. Financial ratings, underwriting appetite, service quality, and coverage options can all change over time – sometimes for the better, and sometimes for the worse.
If you notice changes you don’t like, consult with your agent to find out what is going on. Sometimes it’s an easy fix that can be handled with one phone call. Other times, it’s something bigger that many policyholders are feeling. Ask your agent if there are other carriers they would recommend, and the strengths and weaknesses of each. Get alternative quotes, but don’t forget the items we discussed above. Dig deeper than face value to make sure you are getting what you need for your business.
Item #7: Changing insurers every year.
Ok, we know we just said not to stay with the same insurer for too long. But, jumping from insurer to insurer comes with its own risks. Every jump means a new policy format and learning new coverages, restrictions, and exclusions. Working with a new insurer also means working with new people who are likely learning about your company for the first time. This is important from an underwriting perspective, but also loss control and risk assessment.
When reviewing insurance quotes, we focus on premiums, coverages, and terms & conditions. What we often forget to contemplate are the people we work with. From your underwriters to your loss control and risk assessment representatives, to your claims managers and adjusters, these are people who can make things easier for you and your business, who can help you run a safer business, and who can help you recover in the event of a claim.
When you find good people who care about your business and want to do the right thing, isn’t that worth something? Premiums will fluctuate, coverages will change, but the right people can see you through those changes. They can also provide you with options if you do wish to make a change.
As a company in the forest products industry, you know the risks present in your business. You research new pieces of equipment before purchasing, you take time to clean and maintain your machinery, and you work hard day in and day out to provide a quality product for your customers. Apply that same diligence to your insurance. The first step is finding an agent you can trust. From there, encourage your agent to work with a specialist like Continental Underwriters, Inc. We know your industry and we know insurance. With your agent, we will work hard to develop an insurance program for you that fits your business.