The Achilles Heel

The one insurance coverage you should have but don’t could open the door to a catastrophic loss that ruins everything you have spent years building

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Back in my small-town newspaper days I had to write about a fire that started from a natural gas explosion and burned an entire block on one side of the main street.

In the supremest of ironies, one of the businesses that burned was a one-man insurance agency – whose owner didn’t have renter’s insurance for his office space. I don’t know if the fire put him out of business entirely, but it certainly set him back.

Now, most business owners (especially insurance agents) are smart enough not to let something like that happen to them. And yet, how many of us walk around with insurance that’s inadequate in some way – putting off buying coverage we really should own because we’d rather spend the money on something else, or save it? Or because we have ourselves convinced that what we’re supposed to insure against will never happen?

Vulnerable areas?

I would have to plead guilty here. Oh, I’ve got enough car, home, health and life. I finally bought umbrella liability about half a dozen years ago. My boat is insured, and so is the RV I have on a northwoods lake lot.

But, without getting too far into my personal life, I have a couple of chinks in my armor that my insurance agent is dutifully trying to fill in for me. And I keep dutifully putting him off – knowing I’m exposed to losses that, while perhaps unlikely, are real.

Our Money Manager column this month looks at kinds of insurance that many small businesses should have and that some owners who read this magazine probably don’t. Maybe not everyone needs every type of insurance mentioned there, but everyone should at least look at the list and determine, with help from a professional advisor: Do I need it? If I already have it, do I have enough? (Or for that matter, too much?)

It’s axiomatic that no one enjoys buying insurance, at least in the way they enjoy buying a new truck or machine. But the mere fact it’s no fun is no reason to put off a buying necessity.

Feeling the pinch

The biggest reason not to buy insurance, of course, is its price, in relation to the fact it’s an intangible. Risk is an intellectual concept; spending money is an emotional matter. Of course, things become tangible very quickly when a calamity occurs and needed insurance isn’t there.

Maybe if we’re avoiding the purchase of necessary intangibles like insurance, that’s a sign we’re running too lean – on too little profit margin. A healthy hourly rate should be adequate to cover all overhead, including the insurance coverages that are necessary to protect the business.

Or maybe we’re running a little too fat – taking profits instead of investing in protection against things that might at some point deprive us of a livelihood. Either approach is counterproductive.

Time to act?

A story is told about the legendary Henry Ford, sitting through a meeting in which his executives jawed on endlessly about a large and very costly project at one of the Ford car factories. Finally, Henry spoke up.

“Look, is this going to be expensive?” he asked. There were nods all around the table. “And does it seem as if it’s got to be done?” Again, nods all around. “Well then,” said Ford, “Let’s stop wasting my time and do it.”

Maybe a little of that psychology can propel a decision to invest in the insurance that’s needed to keep your business safe from avoidable financial harm.


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