The Cost Discussion

Over the past month, I've watched at least five different college 'idiots' who wanted to be interviewed, and explain how burning business operations was OK....because they had insurance, and that would pay for everything.

More or less....I just am amazed at the amount of stupidity demonstrated by the college kid.

Most business operations will have a minimum of three insurance packages: (1) General liability insurance, (2) Property insurance, and (3) Business owner's policy (BOP).  So let's talk about these.

General liability insurance is usually for injury or harm to you, your employees, or your customers.  You serve some bad food, and customers sue you for hospital time or out-of-work periods?  This insurance falls into play. 

You go through a period of no usage....the rate stays stable.  You go and activate it several times in one year.....the rate goes up.  Who pays for the rate increase?  Customers....via the cost of whatever you sell or service. 

Property Insurance concerns the building itself.  If you get wiped out via a flood or tornado, this insurance kicks off.  Deductibles?  The more you build into the deductible....the less you pay yearly.

The average deductible is 1-percent of the value of the building.  But if this is a upscale pub or restaurant, worth $750k?  You might go and establish the deductible at ten-percent (75,000).  Who pays for the insurance and the deductible?  Well....the customer pays in the end.....it's figured into the cost of what is sold.

BOP.  This will usually cover business interruption insurance, vehicle for the business coverage, crime/break-in insurance. 

In almost every case....if you activate a policy....your cost rises in the next twelve months.  It might be 10-percent....it might be 50-percent.  If this was a total loss, and due to a riot, you can imagine a insurance company looking at a possible repeat, and maybe bringing the package to a 100-percent increase.  If there is no police coverage in the area, they might just refuse the insurance request, and say 'NO'.   Odds of you rebuilding if no insurance is possible?  ZERO, no idiot would go and build a McDonalds in a police-free zone. 

There is a clear lack of understanding over capitalism, and the cost factor attached to conducting a simple coffee shop or restaurant operation.