Operating a retail business involves plenty of challenges and inconveniences, but insurance doesn’t have to be one of them. Yet, many small retail business owners find themselves struggling to read through policy jargon and worrying about whether they will actually be protected if the worst happens.
With the retail world undergoing dramatic changes in recent years, comprehensive coverage has become essential. How can businesses make sure their retail policy will protect everything they’ve worked so hard to build?
Read the Fine Print
The finer details are often the most essential components of retail insurance policies, so businesses must be diligent and read the terms carefully. Although general liability coverage is the foundation of most solid retail insurance policies, not all liability protection is the same. A typical small business needs policies with coverage limits of at least $1,000,000 per occurrence for both property damage and bodily injury. While some carriers may offer even higher limits at a reasonable cost, others only increase the limits for a hefty price.
Property insurance is another consideration. Replacement cost coverage is generally preferable to actual cash value, even though it carries higher premiums. Consider what would happen if a fire destroyed inventory that had been sitting on your store shelves for several months. An actual cash value policy would factor in depreciation, leaving you on the hook to cover the wide gap between what your insurance pays and the true cost of replacing these items.
Likewise, business interruption insurance provides valuable protection against lost income in the event of a covered closure. However, you need to understand how your carrier calculates the coverage periods and income replacement these policies provide, as some carriers base their calculations on the business’s earnings from previous years, while others employ more sophisticated models that take growth trends and seasonal fluctuations into account.
For retailers who sell manufactured goods, product liability insurance deserves closer scrutiny. Even if your business is reselling products rather than manufacturing its own, you could still be hit with a lawsuit should a customer be injured using an item they bought from your store. Ideally, this coverage should extend beyond the more obvious customer injury scenarios to include issues such as unclear instructions or inadequate warnings, as many policies have exclusions that leave retailers exposed in these cases.
Cyber liability insurance is becoming increasingly important as retailers encounter growing threats from hackers and data breaches. These days, all businesses handle customer payment information electronically, so look for policies that cover first-party costs, such as forensic investigations and notification expenses, as well as third-party liability for any regulatory fines and customer lawsuits that arise from breaches.
Nearly every retail business needs workers’ compensation insurance, although specific requirements vary by state. A major factor in determining the rates of these policies is job classification, so make sure to accurately categorize employees. Stock handlers and cashiers have substantially different risk profiles, and their premiums will reflect this.
Pricing Considerations
Many businesses understandably focus on premium costs, but this should not be the sole factor driving decisions. In many cases, the cheapest policy will end up being the most expensive one when a claim arises. Therefore, a better approach is to focus on coverage adequacy, quality of service, and claims-paying ability alongside price.
Retailers can avoid unpleasant surprises later by carefully reading policy language and looking for the types of gaps that often only become apparent after filing a claim, when exclusions and limitations can work against them. Professional guidance can help business owners spot these potential gaps.
How the Major Players Stack Up
The coverage and prices offered by major providers will vary depending on the specific details of the business in question. However, generally speaking, many of the industry’s biggest names have earned reputations for strengths in different areas.
For example, The Hartford tends to rank highly for offering solid policy options to small businesses with a reasonable level of customer service. They also offer online tools that can make managing policies fairly straightforward. On the other hand, their pricing tends to be higher than that of their competitors for comparable coverage.
Travelers, meanwhile, is known for its longstanding financial stability and decades of experience in the industry. It offers retail-specific policies with useful features, such as seasonal inventory adjustments. However, some agents report that they have a highly bureaucratic claims process, and response times can be longer in busy periods.
The small business division at State Farm is known for offering competitive rates, and many business owners appreciate the personal touch that comes from its strong local agent relationships. Although this can smooth the claims process, some report that State Farm’s policy options feel limited compared to those offered by commercial-focused carriers. In addition, some tech-savvy business owners believe that their online presence has not yet caught up to the competition.
Liberty Mutual is geared toward middle-market businesses, which means that its options for smaller retailers may feel somewhat limited. However, their pricing is considered moderate, and they have strong risk management resources that help businesses identify potential problems before they turn into major claims.
Progressive has been undergoing an aggressive expansion into commercial lines, offering retailers the competitive pricing and streamlined processes the company is known for. Although its quote system is efficient, its coverage options sometimes fall behind those of more established carriers. They have improved their claims handling processes in recent years, but more complex claims situations still require escalation.
Businesses should not overlook regional carriers, as the personalized service and local market knowledge they offer cannot be matched by those of national companies. They also tend to offer more flexible underwriting and quicker decision-making. Surplus line carriers are also an option, especially for businesses that have distinct risks that traditional insurers cannot adequately cover.
However, these assessments are broad generalities. It is best to work with a local insurance agent who can match you with the right carrier and policy for your specific needs.
Are You Ready to Find the Right Retail Insurance Policy for Your Business?
At John M. Glover Insurance Agency, our experienced agents specialize in protecting small retailers in the area, working closely with multiple carriers to find coverage that fits your needs and budget. Let us take the confusion out of insurance shopping for you by explaining policy terms in plain English and helping you avoid costly coverage gaps. Reach out today for a comprehensive policy review and competitive quotes from top-rated carriers.
