Don’t Make Insurance An Afterthought

Anyone starting a business of any kind knows that one thing is certain, that before the doors are opened on the fist day, one will have to secure insurance for the business. An independent service operation is no different, and most owners likely go to their bank or insurance broker and take out insurance and get on with running their business.

But is an independent service operation just like any other business? Is the kind of insurance coverage needed the same as the insurance needed for operating a small clothing store or a restaurant?

While SSGM will not recommend to anyone what kind of insurance they should secure for their business, or where to get such insurance, we can provide a quick, if simple, overview of some things a shop owner should ask when getting insurance for the business.

Liability coverage

Doug Searle, director of business development with PBL Insurance Ltd. in London, Ont. said all liability insurance is to protect the owner and assets of the business if something happens.

“In a repair garage, if someone is working on somebody’s vehicle and as a result of the work they have done there is an accident and they get sued as a result of the work, whoever was injured in the accident and any property damaged caused, the claim will be targeted at the owner of the business,” he says.

As well, liability insurance protects a business against such unseen disasters as a fire, or damages by a fire that begins in an adjacent building.

The problem with many shops, according to Searle, are owners often do not buy the correct kind of coverage they need, or enough of it. He does not blame the owners for this. Insurance is often a complicated business and there is much that has to be reviewed. Added to this, is the cost factor. Some owners often try to save some money by buying only the minimum amount of insurance they think they need. Again, the problem with that approach is the owner does not take the time to think through what exactly they must have and to factor in unforeseen contingencies or future plans for the business as well.

This is why the first things people in the insurance industry will tell a prospective shop owner to do is to first come prepared with all the necessary paperwork and information about their shop the insurance representative will need. Angelo Zacharakis, associate broker with D. L. Deeks Insurance Inc. in Toronto says owners should come with such basic information as payroll, gross receipts, how many vehicles a shop has on its property at any one time and their value, for example.

The reason for this is it will be used to establish a base-line for evaluating what kind of property and liability insurance one will need. Take tools, for instance. Shop tools are a valuable commodity, both to the technicians who use them and for thieves. Insurance companies will insist on knowing what kind, how many and the value of the tools, which is why it is important to do a comprehensive and accurate inventory and to keep all receipts.

“Theft is a big concern for garages,” Searle, adds. “Thieves know that often tools will not have a serial number and they can do a smash-and-grab and the tools are often in cabinets with wheels. So there is a risk of someone knocking down the (shop) door and taking the tools. It can be done in a matter of minutes. There are tool chests out there that can have some $120,000 of tools in them and they can be gone quickly and peddled on the black market.”

Remember to regularly review your plans

But it is also important to remember that all this is only a base-line. Over time, a business grows and changes: employees come and go, the workforce size can grow and even the facility can change as well; and then there are things that happen inside the shops, as more tools and equipment are purchased and new kinds of work are taken on.

So experts say that an important part of any insurance plan is regular reviews of the coverage to make sure that it reflects the realities of the business, its operations, assets and structure. Too often, and unfortunately in a time of crisis, a shop owner may realize the coverage they have is insufficient, a costly mistake.

As Searle often says to people who come to him for advice on insurance, the purpose of buying insurance is to protect your business and livelihood. So it is best to think of insurance and regular revisiting of the coverage and plans as a normal part of one’s business process and an ongoing investment in the continuing longevity and profitability of the business.

“The repercussions of not being insured properly could be the loss of everything you have worked for,” Searle reminds people.