TRUE VALUE OF INSURANCE
BY: DARIN MCCORRISTON PRESIDENT TSMI SPORTS MANAGEMENT
The True Value Of Insurance
Risk & Exposures
The importance of insurance for businesses simply cannot be overstated. It is important not only for weathering potential storms and shoring up the company against exposures but also for customer service. The main issue with insurance, however, is that it needs to be continually re-evaluated and compared against the current economic climate and the types of work being done at your company. One of the largest problems when it comes to facing risk is that the only person who knows the true value of a company is the business owner. That means that he or she needs to be heavily involved in the process of choosing and purchasing insurance.
Risk and exposure, along with your insurance plan, can be painful to review. Even so, it is essential to protecting your company. Review your policies every year, get quotes and shore up any gaps. Many owners of small to mid-sized businesses are of the mistaken belief that they will be better off saving money and going with the lowest price. Unfortunately, that way of thinking can leave you holding the bag when you have to make a claim.
Opt for the best and most comprehensive insurance you can get. Make sure you understand the value of your inventory and act accordingly. Include business interruption insurance in your plan. When you decide on the value of your buildings, remember that demolition
will need to be included in that cost. Aim for 100 percent coverage along with 90 percent co-insurance. Additionally, it is extremely important to understand what that 90 percent co-insurance clause actually covers. Rebuilding or replacement costs should be fully covered by your plan.
“ ONE OF THE LARGEST PROBLEMS WHEN IT COMES TO FACING RISK IS THAT THE ONLY PERSON WHO KNOWS THE TRUE VALUE OF A COMPANY IS THE BUSINESS OWNER.”
Finally, remember that you need to have documentation for anything you intend to make a claim about. This means that, in the case of business interruption, you will need proof of business losses. Business interruption insurance is not always black and white and requires the business provide accurate reporting and documentation.
For my company, TMSI Sports Management, I learned this lesson the hard way. While I had insurance, I did not truly have a grasp of how much work I needed to do on my own to document everything accurately for the claims process. When we went through three major fires, that lack of documentation resulted in a slow claims process with outcomes that were not as desirable as I would have liked. That was when I learned the lesson that every business owner needs to not only understand the true value of his or her company and its assets but also document everything thoroughly. Dealing with the replacement of the building and the associated claims was straightforward. Proving that I had lost revenue and all of the expenses that went along with it, however, was not. Since then, we have implemented off-site backups of important drawings, videos, inventory, and other important documents. Not only has this made insuring the company easier but it is also more likely to result in a positive outcome in the event of a claim.
The key takeaway is that the only person who knows the true value of your business is you. So when purchasing insurance, you should be heavily involved in the process. Make sure to document as much as you can, keep backups and do your due diligence. Replacing physical property is one thing. Replacing lost revenue, however, is much less straightforward. That is something all business owners should have in the back of their minds. +
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