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Insurance for business needs.

A CPA's knowledge of a client's business affairs is key in evaluating the business's insurance needs. This includes coverage suggested by the form of business (such as partnership or corporation) or by product line. It can even be as specialized as the credit and political risk insurance coverage described on page 66.

A CPA's understanding of the scope of a business's activities, the properties owned and the client's risk tolerance also are important. Even armed with this knowledge, most CPAs ultimately will want to rely on business insurance experts and recommend the client engage an insurance broker or risk manager to see if there really is the potential for a loss and if coverage is appropriate.

Small businesses can retain independent risk managers to examine existing coverage and potential risks and make appropriate recommendations. Larger businesses typically have risk managers on staff but may turn to CPAs for help in analyzing the financial impact of potential risks.

Proper protection cannot be left to chance. By helping business owners evaluate some basic strategies, CPAs can make sure everything has been done to protect a business and its assets. Here are a few areas in which CPAs can help:

* Deciding what risk management technique works best and most economically. Commercial insurance is only one option; other methods, including loss prevention, self-insurance and risk transfer, can be used individually or together.

* Dealing with the largest potential exposure first. As the client's budget allows, other less severe exposures can be dealt with.

* Making proper use of policy deductibles to reduce premiums.

Buying the largest possible unit of insurance available. Insurers typically offer lower premiums when more property is insured on a single policy.

* Insuring the correct exposure. Coverage should extend to all necessary business areas.

* Taking full advantage of loss prevention services that may be offered by insurance companies or brokers.
COPYRIGHT 1996 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:Meeting Property and Casualty Insurance Needs
Author:Fleming, Peter D.
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jan 1, 1996
Previous Article:Individual's risk management.
Next Article:Helping clients protect against risk.

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