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Insurance is Always Too Expensive-Until It's Necessary

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I think you have a story about how insurance has saved you a lot of money in your past. As usual, I have a story to make your hair stand up.

But first: here is a fact. Business insurance is one of the most mismanaged risk mitigation measures in small and medium-sized businesses, often because of the inability to assign responsibility to a person or to to a service, and sometimes the willingness to bet against the event.

Commercial Package Policies

Business overall strategies are inexpensive and comprehensive tools that should be contracted by all companies with assets to measure and protect. A typical starter kit for a small business costs around $ 4,000 a year and covers several forms of liability for premises and products as well as the use by employees of their own cars for work, theft, employee dishonesty and more. There is usually a small amount of business interruption insurance in the standard package, and additional protection can be added for a fee.

Here's how to be really scared

Reading the list of protections covered by a typical policy is scary, since most of us never think of such risks. It is overwhelming to notice them in one reading. But beware. The list of excluded protections is also scary for the same reason. It may be why it is important to use a good agent. We do not think about these exclusions unless someone experienced will not report them.

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My story of an event that changed the business insurance

I believe that my former software company was responsible for such exclusion that was an integral part of such policies. (Sorry for that.) With nearly 250 employees, 26 of whom were application programmers, it was important to back up the work of these programmers each night, and one employee was responsible for this every night after midnight.

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The backups of each night would be carefully marked and oriented from one step to the next, so that backups from one day, two days, one week and one week One month are available on site and off site.

Did I fail to mention that for over a year we have never tested whether the backups contained good data? It seems that a change in the operating system on the server that we used for the development has changed the way the backups were indicated, and our backup person was not aware the change of procedure necessary to accommodate that.

The head accident heard around the world

Fast forward to the inevitable day of the massive head accident. I quickly heard about the problem and the fact that all 26 programmers were waiting for the backup to be restored, waiting to lose the day's work.

And the first backup of the previous night was empty. Like every subsequent backup, on-site and off-site. Great OUCH! It took weeks for the team to assemble code from various sources such as customer sites, beta test sites, and demonstration machines. (For you with programming knowledge: Luckily for us that it was uncompiled interpretive code.) Then it took programmers several weeks to get back to the speed of rewrite patches and fixes. programs in a frustrating weeks recreation and more value from the previous job.

Switching to insurance to cover costs

I charged our accounting department to collect and calculate the costs of the loss of labor, which was the only real demand for business interruption because the customers were not affected by the problem. The cost is high at over $ 100,000 and a claim has been filed with the company's insurer.

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After a short negotiation and a quick check, the insurance company paid $ 108,000 to settle the claim. The year was 1987. So, that would mean that the insurance would pay $ 232,000 today, taking into account inflation.

The insurance company reacts

In the next year 's renewal policy, I noticed a new page in the exclusions section, excluding data loss for the first time because of failed backups, regardless of what happened. in either the cause or the fault.

Either we were the first to make a significant claim under this previously covered part of the policy or one of several who did it that year. Either way, you have to blame for one more of those exclusion pages that are overwhelming these policies today.

And that is why insurance policies seem to add more exclusions each year. Sorry for what could be my contribution to the list …