For those who drive, you always have a spare tyre especially when going on a long journey and yet you never hope to use it. Why bother? Then there are those who have guards at their homes and places of work yet when no attack occurs they do not withdraw the salaries paid. Such is the importance of insurance. It is the only product in the world that you buy and hope you will never use.
I have noticed that businesses are most notorious at ignoring it. The reasoning most submit is that if they do not see any immediate benefit, it ties working capital and disrupts cash flow. I don’t blame them though- the industry itself has not done much in terms of educating them on the importance of insurance. It is difficult for a growing business to see why they should commit money to a product that is of no immediate direct value to the struggling business; yet, this thinking implies that at one time need and value will be apparent which is not the truth.
The purpose of insurance is exactly the same as that of the spare tyre. You want to know your business will continue even if it caught a fire or was vandalised. You want to know that should you get a puncture, you will curse at the inconvenience but know you will quickly be on your way. A struggling business, razed by a fire will be a minor inconvenience for someone with insurance. For the one without it, it will do worse than affect working capital and cash flow-it will eliminate it! Like the spare tyre and the guards, insurance is not something you take when a catastrophe occurs- it is impossible to take it then. It’s something you take immediately you start your business and build upon it as you progress; and always remember, like the spare wheel it’s something you never wish to use, much as you have it.
Insurance works in much the same way a granary traditionally used to. Food would be stored there in readiness for a dry spell. The difference is the dry spell was almost a given then; on the other hand, a disaster occurring to your business is not a given. Similarities are many though: different homesteads would store portions of foodstuffs in this one granary to make a pool. Today, insurance companies collect small amounts of monies from different businesses and from this pool they are able to “repair the flat tyre” when it occurs. The flat tyre could be a fire or theft; whatever it is, the cost of putting the business back on its feet is usually much more than the cost of buying the insurance. In fact, the more the people who buy the insurance and the lower the incidences of the misfortunes, the lower its cost becomes.
Most insurance products for a business last 12 months and are renewable at the end of the twelve months. To their credit, insurance companies have developed products that respect the erratic nature of business income. For instance these products allow the business to have any insurance the business might need (like fire, theft, loss of income) as one product which is then renewed on one date. This makes it easier for the business to plan for it. Insurance companies have gone further to enable businesses pay for the insurance in monthly installments, though this may not always be easy for a business not getting a regular income. To know a good insurance company always check with your country’s insurance regulatory authority.
Businesses take time and effort to build. It is unforgivable to let all this input go to waste overnight because a rioting mob demolished your stock of electronics, or a careless smoker left a burning stub in the dustbin and the resulting fire brought down your barbershop. With insurance, this would be a puncture you click your mouth about and proceed to repair as a minor inconvenience. Without insurance…
The author is a trainer, speaker, writer and Principal
Officer at BKY Insurance Agency