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  • Writer's pictureErika Andresen

Oh, I have insurance for that! Ok, but...

Updated: Jan 30, 2023

You have insurance. Congratulations! You have enabled yourself to navigate the financial stress of a risk event happening. That is an incredible feat - honestly. Not everyone can afford insurance. You will be thankful if you ever have to use it.

But did you really save yourself...or did you (maybe unwittingly) kick the can down the road for the real issue: the risk.

I'll worry about it later.

I have a work-around for that.

I have other pressing issues to deal with now.

I have insurance.

These are all ways of kicking the can down the road to deal with the real issue later. Short-term or temporary fixes give a false sense of security. They make you think it's handled. They tell you to check the box and move on for now, only coming back to it later when you have time (you never find the time, though).

Business insurance, like all insurance, is a financial "cure" for the event. Financial. It doesn't cure the whole event. You still have an incident to deal with and the inconvenience of filing the claim. Think about a car accident: just because you have insurance (and let's face it, not all coverage is equal) you'll still need to wait until they pay out the claim and deal with the other driver's insurance company. You may need a rental while waiting for repairs or use one while awaiting the payout for whole new car.

But what if you can avoid the accident to begin with? Not even need the headache? That would be better, right? Don't be fooled by the comfort the security blanket of insurance brings you: you still need to address the risk.

There's a general term for overall insurance coverage for disasters or disruptions – business interruption (BI) insurance. BI will reimburse you for lost profits when a threat or disaster causes your business to temporarily cease operations. The temporary part is key: if you close for good, it doesn’t count. If you shut down temporarily while trying to clean up after a tree falls on your building, that does count. It’ll also cover your fixed costs, like rent, utilities or payroll. You can also get extra expense coverage in the event you have to relocate temporarily or anything you normally wouldn’t have to pay just to keep your business running, like overtime to speed up the return to normal operations.

There is also something called Contingent BI which has more to do with supply chain issues and customers: it's coverage when there is a disruption to your business due to a disruption at your suppliers.

While we’re on insurance, here’s a pro tip: having a business continuity plan will help maximize payments made to you when you make a claim on your policy after an event. How? You proved you tried your damnedest to avoid the interruption. You can even get a discount to your policy by having a plan!

Business continuity is about long term solutions to short term fixes. Make a plan, and don't let that plan be relying on short term fixes (like insurance) until later. Ideally do both, but make the continuity plan the primary goal.

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