We hear about bankruptcy all the time. Most of the news we get is big businesses like Gap, Walgreens, Sears, Pennys and others. The American Bankruptcy Institute (ABI) thinks these firms are in danger of collapse in 2018. The ABI says commercial bankruptcy filings rose 26% last year and most of those are small businesses.
That’s not good considering small business is the backbone of the U.S. economy.
Commercial real estate brokers Cushman & Wakefield released some data recently saying some 12,000 stores will likely close in 2018. That’s up from 9,000 or so from 2017.
Along those lines Insureon and Manta checked in with small business owners. Their survey found only 9% of the 1,200 small business owners they questioned have been bankrupt before. A whopping 98% of that number said they don’t expect to ever have to file.
That’s very positive but many of that 98% could end up in failure and bankruptcy because of the lack of the proper insurance. This is insurance that would pay for lawsuits and incidents that can lead to bankruptcy.
In an interview with Insurance Business America, Insureon President Jeff Somers said, “It’s remarkable how many small businesses are either uninsured or underinsured. Small business owners are literally pouring their blood, sweat, tears and hard-earned dollars into building their businesses, and yet many of them lack appropriate protection for the unlikely event that something does happen to their business.”
Here are some stats from the survey:
• Just 28% had business owner policies. That’s the combination of general liability and commercial property
• A minuscule 6% had business interruption insurance
• 17% don’t have enough workers’ compensation
• Only 2% have cyber insurance
Somers pointed to the 98% who don’t worry about bankruptcy and said, “When you look at ABI data from 2016 when almost 38,000 businesses in the US declared bankruptcy, you realize these business owners are perhaps overly optimistic about the risk. It is something that does and can happen — and there are appropriate steps you can take to protect against it.”
An example he gave is an injury when someone slips and falls. Somers notes the average settlement is $20,000. That’s a tough nut to crack for a very small business and is something easily fixed with a BOP. Damaged or stolen property is paid for via a commercial property policy. General liability helps pay for lawsuits and in this case a lawsuit involving a slip and a fall.
“The problem is, not all small businesses truly understand their insurance needs. There’s a lack of awareness and education, which insurers and brokers must try to resolve. One reason for this protection gap is a misplaced anxiety around how much insurance actually costs. But when you compare the small price of business insurance to the potential risks it protects against, the math is very straightforward,” Somers said.
He added that many small business owners don’t realize the risks they face.
“Many think if anything were to happen to them, it won’t be a big deal because they’re only a small business — but in reality, these risks can be a big deal. As small businesses they’re particularly at risk because they can’t afford to take any kind of major hit to their business. The risk/reward profile is so skewed in favor of the small business when they elect to take insurance that it’s a really smart thing to do. Our job is to make sure they know that,” Somers said.
Source link: Insurance Business America