Choose insurance with both analysis and imagination

Sound insurance calculations require a vivid imagination and a calculating mind.

If any question existed in the minds of American people about the varieties of insurance coverage possible, the latest celebrity gossip demonstrates how insurance is limited only by one’s imagination. If celebrities require imagination to protect the limited scope of their earning potential, how much more creative an entrepreneur must be with their business?

There are insurance options for anything you can imagine. There’s insurance for catastrophic events, such as floods, volcanoes, and even nuclear attack. There’s insurance for loss of earning potential, such as the loss of income after an office fire destroys your machinery and work environment. Other insurance covers actions your employees take, from accidents to willful property destruction. A business can be insured for crime, for weather, and for mistakes. If you can imagine it, you can insure it.

The only tool besides an imagination that an entrepreneur needs is a calculating mind. Insurance can be purchased for any circumstance, but not every circumstance is equally likely. Flood insurance in an area that hasn’t had a flood in 200 years may not be worth the cost, while tornado insurance may be absolutely necessary in the “Tornado Belt”. Besides a mind to assess the risk, an entrepreneur also must read carefully the insurance terms. Insurance is specific, and assumptions are not welcome. Even general policies have exceptions and, while these exceptions may not impact every business, it may be a high risk for yours.

Business, like life, requires risk management. What risks are worth taking, and what could be ruinous? The answer is unique to the business. A buzz saw manufacturer obviously wants a generous product insurance plan, while a beach ball manufacturer has little need.

As an entrepreneur, your imagination is a critical tool to begin finding places of risk. If your a retail store owner, walk into the front door as a customer and think about what could go wrong. Could you trip over the doorstop? Could you lift a candy bar without being caught? How much damage could you do with lighter or a pocket knife? How much cash could you walk away with if you robbed the place?

The entrepreneur’s risk assessment begins with imagination, but calculation is where decisions are made. You’ve imagined that a robber could lift $5,000 worth of cash from your safe and another $5,000 worth of merchandise if the robber is alone. But are robberies common where you operate? Are other protective measures already present that mitigates the risk, such as being part of a chain of businesses with a common security detail? Will the $10,000 loss outweigh the available plans for robbery insurance? It is as imperative to learn the facts as it is to identify the risks.

There are many more business risks than personal risks. With health, car, and renters insurance, I’m covered for most every cataclysmic event that might ruin me. But a business compounds the risk one hundred fold. There are employees to cover, additional resources to lose, new ways of funding to have interrupted, regulations to adhere to, and bigger targets for natural and man-made disaster. Reading Steingold’s list of insurances, my imagination swirls with new ways that businesses could be at risk, and what may be worth insuring. Except for the exorbitant price tag, your business could insure itself from absolutely every event, even failure.

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