You should undertake a review to determine the acceptable level of loss your business is willing to tolerate. This review should include everything from the possible loss of your business property (for example, due to a fire) to your general liability (as a result of someone slipping on your floor). One recommended method of doing this involves three steps:
The following risk categorization model can be used to help you determine your alternatives.
As you can see, insurance is generally needed to protect against severe losses. In the other instances, you can take other actions to either avoid (where losses are so frequent and severe that they cannot be tolerated), retain (where losses occur infrequently or are minor and are considered part of the cost of doing business), or reduce the risk (where you can use loss prevention measures such as mirrors, closed circuit televisions, etc.).
Take action to implement and monitor solutions: use the above model to help you choose alternatives; then track your losses over a period of time. Go back and reevaluate. If your level of losses is still too high, then you will have to go back through the prioritizing process.
Once you have determined what risks you will have to cover with insurance, your financial professional should be able to help you decide how much coverage you need. Of course your decision will be influenced by the cost of the insurance and the amount of money you have available to spend on insurance.