Several weeks ago I was having a conversation with an insured, a small business owner, and he asked “why do I need ALL this insurance. It’s so expensive and I don’t know that it covers anything. Is it really important?” My response was… it’s your perspective. The purpose of insurance, especially business insurance, is not to cover maintenance, general wear and tear or small minor losses that can be self insured. Instead, your perspective should really be that business insurance is for catastrophic events that create a significant hardship or financial loss. That hardship is different for each person and each business. Insurance is really meant to protect you against the “what if”; those events that are not certain and can’t be planned, not the inevitable. In my opinion, you purchase insurance with the mindset that you never plan to use it.
Insurance is a contractual arrangement. Insurance protects your name, your property, your employees, and even your customers. It protects against events like fire, wind from hurricanes and tornedoes (natural disasters). But business insurance goes well beyond natural disasters into other areas outside of one’s control like cyber attacks and having your data held ransom, theft, being sued for a faulty product, injury or worse… death. Ultimately, business insurance helps protects you from losing your business due to the unforeseen, it helps retain key employees and insures (no pun intended) what you’ve worked so hard to create can be restored. It is meant to return you to whole, not to put you in a position better or worse than when the event occurred. A key to making sure you are properly protected is hiring an insurance professional that knows you, your business and your industry. I encourage you to interview different agents to build rapport, understand their best practices and find out how they can offer value to you as a business owner. My counsel is also to self insure where you can and it makes sense, for example carry higher deductibles and budget annually for the incidentals. This helps control the cost of your insurance. However, you didn’t hear me say self insurance circumvents or replaces the importance of insurance. Business Insurance is so important to protect you against the multitude of different risks that you may not have conceived and definitely have not planned. It is realty as these events occur every day.