Today’s article is motivated by the unfortunate outcome of the destruction of property due to the #maandamano that has been happening, which has led me to be concerned about the state in which the majority of business owners are operating their businesses.
As a business owner, you take the risk of investing in a business because you believe in it at the very least. You’d go through whatever lengths it would take, including taking a financing facility, but never consider taking an insurance cover. After careful consideration, it is not a business owner’s weakness, I’m sure you have ever had someone say they are a medical bill away from poverty, but don’t go ahead and get a medical cover.
So it is my conclusion that it is not an awareness problem that makes most of not take an insurance policy, and in all honesty I really can’t place my finger on why, but I’ve decided to take a wild guess and say it can be because in our assessment the probability of the risk materializing is minimal to us and hence we feel like paying the premiums would surmount to waist of resources that are limited as is.
So, as you are reading this, allow me to ask, do you have an insurance policy? If YES, what does it cover, and why did you take it? And if NO, why don’t you have any?
If you care about something and it is in danger of loss, it is prudent to take precautionary measures to ensure that in the event the risk materialises, the loss suffered would be minimal, and that the time taken to bounce back to normalcy would also be minimal
Allow me to narrow this and take the focus to business risk insurance, which is what I wanted to address.
There are so many type of risks that a business is exposed to and as an accountant I will be the first person to say, prudent financial management should if not must be applied as far as spending is concerned and that is why, I say before you go ahead and take an insurance cover ask yourself the following questions
- What risk is my business exposed to? (List them all)
- What are the chances of occurrence? (List per risk the probability of occurrence)
- What would be the loss suffered in case of the risk materialising? (Put this in monetary terms per risk again)
- How much time would it take me to bounce back? (This helps understand the time value of money, but also the mental burden.)
After the above assessment, consult Google on insurance companies available; on this, the following is what you want to assess
- Credibility of the insurance company (use the portfolio value of the risk that the company has to assess this)
- How much time is taken to process payment (ask around, and for even a bigger pool, ask on your social media for feedback)
After the above, get at minimum 3 insurance companies, and request a quote from each, read, review and analyse the fine print as much as you’d take note of the amount of premium you’d be paying and the intervals of payment.
It would be an injustice from me if I were to leave this chat without my opinion on which risks I think, as a business owner, you should consider having a cover on, and these three are the most key ones that cut across all industries of operation
- Fire
- Burglary
- Political violence
Let’s have a business owner’s candid conversation. What is it that you’d like to know about prudent financial management
Checks & Balances
You fail to take an insurance cover for a risk that you’d have paid a negligible premium, then the risk materialises and you suffer millions in loss and take who knows how long to re-open, not to mention the highest chances that the only way you’d be able to re-open is through debt financing, be smart and plan accordingly