There is no one rule to apply to insurance risk as everyone's situation is different. However, start by brainstorming up every conceivable risk. Then divide your list into two columns:
1. What are the potentially catastrophic events that may affect your business? What are the events that could result in financial loss, cause you to substantially change your lifestyle or force you to close down your business? These are ideal risks you should think about insuring for.
2. What are the risks that might potentially cause you to suffer losses but which you could manage out of your own resources such as cash assets? Generally, you may not need to insure against these risks.
Whenever they start to work through their insurance plan, most people tend to think about things rather than people - the buildings, the vehicles, plant and equipment. You also need to factor in the impact if key people were suddenly not there to make everything run smoothly.
Do a double take and consider whether you've really taken human capital risk into account. What would be the effect if you couldn't work for six months, for example? Who are the other key people in your business? What would be the impact if they couldn't work for six months or if they couldn't return to work at all?
Often people make the mistake of over or under insuring in the wrong area and find there are gaps in their risk management plan. For professional advice in structuring your risk management plan connect with your local insurance consultant.
Business Forward Issue 71
- Our Team
- Business Advice
- Featured Partner
- Featured Client
- Accounting 101
How Do You Know What To Insure?
October 25, 2016