The shock is over, reality has set in, the business has stopped or slowed down, now what? Assess what has now occurred, will sales be down? Will payroll be down?
Make adjustments with ongoing expenses. For example, many insurance policies are based on either payroll or revenue and are often not thought of or reviewed until renewal time, however, you can make adjustments anytime during the year, and you should, especially if your business has changed exponentially. What insurance policies should you consider?
1) Workers Compensation is based on payroll, so if payroll is now going to be down by 20% or 40% due to the business closure for 2-3+ months contact your agent and get your payroll lowered immediately. Have your agent set a six-month reminder to check in with you to see if it needs to be readjusted if the business has improved or deteriorated further. Why pay in advance for workers’ compensation costs that no longer exist at the same level. The carrier is not going to contact you to alter this, you must think of this and revise the policy, otherwise, it is only caught at audit which is usually done months after the year has ended. There is no penalty for underestimating your payroll, nor do the insurance carriers pay you interest on the money you paid them in excess. If the payroll is higher than you estimated at the end of the year you will just need to pay the premium difference at audit.
2) General Liability can be based on several different factors depending on your industry but many are based on either revenue or payroll. Again, if these areas have changed they should be updated with your insurance carrier so you can take advantage of the lower rate of the insurance. There is no need to pay in advance for sales or payroll that is no longer accurate and it can be adjusted again during the year if it is either lower or higher than anticipated. General liability is also often audited a few months after the term of coverage ends, but some policies are not, so a dramatic change in payroll or revenue may not be caught but it is a factor in the rating of premium for many policies.
Other policies you may have can be affected as well, such as Cyber Liability, Professional Liability or Employment Practices. The variation in cost-saving with all these policies should be in alignment with the percentage reduced for that area of charged premium. You should not modify your payroll or revenue with your insurance carriers several times a year, every year, but if a crisis hits such as the current environment it is an area that should always be considered and adjusted for better financial health of the business.