Got Uninsurable Risks?

“Uninsurable” can mean an insurer will not offer a certain coverage, or that you cannot afford the premium!

Will not offer: There are many risks that are considered uninsurable by insurance companies. Most often because they are looking out for their bottom dollar, including reasons like:

  • They don’t want “sure losses” like inventory shortages or fender benders.
  • They’re afraid of some catastrophes, such as terrorism, that can cause many sizable losses all at once.
  • They cannot cover things deemed “against public policy,” like fines and penalties, punitive damages in many states, or fraud and other intentional, deliberate, or criminal acts.

Too costly: Other risks become uninsurable for business owners because of the requirements or the cost.

  • Oftentimes businesses or individuals can’t afford special “required” safeguards like sprinklers or vaults, expert appraisals, or audited financials.
  • Without the protection, minimum premiums can be far more costly.

So now what? Uninsurable means prevention is all you’ve got!

This is not the time to cross your fingers and hope. Let’s create some simple, yet effective, plans.

My mantra is Buy Your Insurance Last™, so client projects focus first on prevention. If you can prevent the loss from happening, it’s no longer a key issue.

  • Take any risk and list all the ways to prevent it from happening. This takes brainstorming and creative thinking. Get input from employees, clients and advisors. For example, think about ways you can prevent loss of customer data and the possible identity theft that would damage your reputation and result in lawsuits.
  • The second step is contingency plans for when a loss does happen and it needs to be minimized quickly. The same process applies. You can’t prevent an earthquake, for example, so what plans can you put in place to handle the possible fallout – helping employees, being able to contact customers and suppliers, protecting or replacing your critical equipment?
  • Then carefully consider which risks you can contractually transfer to others – in a fair and transparent way. You should be able to agree who is better able to manage the risk and costs of prevention and potential losses. Examples include a data or security breach and identity theft lawsuit caused by your computer consultant’s error, and copyright infringement caused by your marketing firm.

A better risk profile ~

By this time, your risk profile will be in far better shape, and you may even be able to “self-insure” or handle some risks without insurance.

Other considerations might include a rainy-day fund to pay for something that does go wrong … despite all your efforts. Make sure you negotiate that line of credit before there’s a crisis.

Diligent risk management will have you reconsider, test, and update your decisions and your plans periodically.

If you have questions or more complex circumstances, don’t hesitate to click reply or give me a call – charles@risksmartsolutions.com | 510-685-3883. There’s never a charge for brainstorming!

 

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