Money Tight? Don’t Gamble Your Future To Save Pennies

By Frank Thompson on Apr 23 in Cyber Liability.

Propane marketers that had a mediocre year in 2009 are looking for ways to save money. The economy and the continued high price of propane has forced many customers to cut back on their energy usage or to look at alternate sources of energy; thus for many marketers their gallons are down.

When these marketers talk about property and casualty insurance, many look for ways to reduce premiums. They realize that their health insurance premiums are increasing and the cost of doing business is climbing. They talk to their insurance agent about what coverage they can remove from their policy to reduce their costs. Many are willing to gamble to save a few dollars today but are not looking at the long term effect of not having the coverage.

The package policies that most marketers have contain a number of coverages that have been added over the years. They are the result of insurance companies and agents knowing the type of claims that are common to the propane industry. These coverages have been included to enable the marketer to get back into business following an insured loss.

For example, many marketers think to save a few dollars that they will drop or not insure their Business Income and Extra Expense cov­erage. Dropping collision and comprehensive seems to be a good idea to save money to some or increasing deductibles to an unreasonable high amount appeals to others. Recently, I talked to a marketer that chose last year to go with an insurance company that offered him a $25,000 Self Insured Retention. He was willing to gamble a $7,500 reduction in premium but put his own company at risk for paying the first $25,000 of claims. He had ex­perienced two auto losses during the past year totaling almost exactly $25,000 and was having a tough time paying not only his insurance premiums but also the deductible. Money was tight and he felt he had to gamble and lost.

Another example happened to be a client of mine who balked at buying physical dam­age coverage on his bobtails. He had a very nice bobtail worth about $45,000 which was completely paid for. Well wouldn’t you know it, his son dumped the bobtail, which during the ensuing rollover struck a rock, breaking a valve and the whole unit burned. The cost to replace the burned bobtail was $120,000. The swing on his financials went from a $45,000 asset to a $120,000 liability. When money is tight, having to finance the bobtail or reducing your company’s liquidity to pay for a replacement vehicle can be a disaster and all it would have cost him to insure the physical damage was $300.

Lastly, some marketers think that they can save a few dollars by not insuring their Business Income exposure. The ability of your business to deal with disasters is crucial not only to your company but also to your community as well. Your customers, friends and neighbors depend on you to be able to get back into business if a disaster strikes your company. Business income and Extra Expense is a coverage that will pay to keep your company’s income intact from an insured risk, while you rebuild. The national average is that 85 per­cent of all businesses that experience a major disaster will not get back into business. This statistic alone ought to cause all business own­ers to review their disaster plan and to carefully review their coverage. Your company’s property and casualty pro­gram can make the difference between the loss of your business and its survival.

Frank Thompson

Frank B. Thompson is a chartered property and casualty underwriter based in Phoenix. He is the owner of PT Risk Management, an independent insurance company specializing in writing propane and petroleum risk policies throughout the U.S.

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