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What are the biggest mistakes retail business owners make regarding insurance?
The biggest error is not taking the time to properly identify the risks facing their business. Obviously, some risks can be insured and passed on to the insurer, but other things such as compliance with legislation, and supply management have to be actively managed by the business owner. Once there's a focus on the insurable risks, they should equally focus on those risks they have to actively manage themselves. That's critical.
With insurance, there are two critical questions to answer:
- What cover is required?
- What level of cover should the business owner buy?
What about random or unexpected disasters hitting business?
Most businesses easily identify some property damage risks, such as fire or storm. But they often forget about the financial interruption to their business. Business interruption insurance covers the business' cash flow while it is interrupted as a result of damage, either to the premises itself or to adjoining premises. Many people don't consider that if something happens to an adjoining building, it might restrict access to their business and affect sales and profit.
Start-up businesses often learn how to protect their businesses on the fly. What are the main insurances they need to consider when setting up?
The obvious covers are:
- fire and property, including burglary and glass
- public liability and products liability
- business interruption.
It doesn't provide for business failure because of a poor business plan, but it protects you in those early days when cashflow can be critical. I would also recommend that start-ups engage a valuation service to make sure they have adequate cover. If you are moving into, or have just bought, premises, you need to understand the associated rebuilding costs. If the building burns down, you may have restrictions, or may have to rebuild with certain materials to comply with building regulations, which might cost a lot more than you paid for the building.