Avoid Overexposure – View Source Article
September 12, 2011 By: Matthew Mabel
Reduce Insurance Costs without Increasing Risk? You Can if You Buy Smart
The list of fun activities for nightclub and bar owners and managers does not include buying insurance. Many put it in the “necessary evil” category. If you ever have circumstances that lead to a claim, the “evil” portion of that phrase disappears. You realize your coverage is essential and necessary, and you are immensely grateful you have it.
In response to the Great Recession, operators are looking at every possible way to cut costs while maintaining an enticing product for their guests — a logical response to changing business conditions. Some think about reducing the number of employees, spiking prices or switching distributors, while others are reevaluating their insurance policies. Because guests do not see the insurance plans, is costly and excessive coverage necessary? The answer varies from one establishment to the next. Some coverage is optional; some is dictated by your landlord or financing method. You may be able to reduce your coverage plan safely or need to upgrade depending on your unique position.
Going without any insurance is never recommended. If you are mega-rich, you might choose to self-insure. Even then, there are drawbacks because you could lose all of those millions if an action was taken against you.
It’s better to have minimal coverage than nothing at all. It might surprise you that you can cut costs without cutting back by simply educating yourself. Some kinds of insurance truly are nonnegotiable. According to Dean McSherry, president and CEO of Dallas-based Preferred Restaurant Services, a single-source provider of specialized restaurant-industry services, all owners “must have general liability, liquor liability (if selling alcohol), property and crime coverage.”
Liquor liability in particular is paramount for bars and restaurants. Steve Spalding, president of CSI Risk Management, an independent insurance brokerage in Dallas, states, “If the lease doesn’t specifically mention ‘liquor liability,’ then there is no requirement to have it; however, it is highly recommended to carry at least minimal limits. A liquor-liability claim typically involves a lengthy legal fight, and possibly a settlement amount. If you choose lower limits, it is important to try and find a carrier that has legal defense costs outside the limits of your coverage. That way, you are defended without having your liquor-liability limit depleted.”
Obtaining basic types of insurance means you have your bases covered; however, that doesn’t make you bulletproof. If you want to thoroughly protect yourself and your business, consider business-interruption insurance, network-risk coverage and employee-theft coverage.
The idea of purchasing all of these policies can seem daunting, pricey and/or overwhelming, but there are a number of ways to cut insurance costs without cutting back on coverage. Spalding suggests that any business owner, whether a newbie or a veteran, go through his or her leases and policies line by line to make sure the plan suits the business.
“Read and negotiate your insurance requirements before you sign a lease agreement,” he says. “Many lease agreements have been put together over the years via the cut-‘n’-paste method, and lots of them have either vague or onerous insurance requirements.”
Review your plan with an agent who either specializes in or consistently deals with bar and restaurant insurance. If your current provider more commonly sells home, auto or other types of general insurance, it’s time to start shopping around for someone new. Ask for references — operators that have needs similar to yours. Check those references to ensure you are working with the right people. Agents who specialize in this field know the ins and outs of the type of insurance you need. Their advice can result in a more tailored plan and cash savings as well. You also can use Websites, such as netquote.com, that allow you to compare quotes from numerous agencies across the country.
McSherry reminds us that, “In achieving the lowest premium … keep in mind that all carriers are assigned a rate which assesses that carrier’s financial strength and credit worthiness.”
Another way to get your premium down is to have your staff go through a safe-alcohol-server program. Many carriers offer a discount if completed, possibly 15 to 20%.
You also might be spending too much money if you’re operating under an umbrella policy in a multi-business building. Umbrella policies can cover between $5 million and $10 million in damage a year, which will cost between $7,000 and $15,000 a year. This amount of insurance is extreme and unnecessary for most bars and restaurants. By negotiating your coverage down to $1 million, you can save your business thousands of dollars while maintaining a safe amount of protection.
As McSherry sums it up, “All lines of coverage are important and play a role in the overall protection of an operator’s livelihood.”
Each establishment has its own unique needs. As the owner or manager, it’s vital for you to review and revise insurance policies regularly, updating as your business and rates change. Make sure you’re not only getting the best rate, but also the proper amount of protection. Even though your “fun quotient” will lower while you do so, the risk involved with foregoing or skimping on necessary insurance is far too dangerous to be a viable option. NCB