Insurance seems like a necessary evil for most of us. It is one thing that seems very expensive until you need to use it.
In business and life, insurance plays a vital role in risk management as it can be put in place to help lessen the financial impact of a situation, should it happen.
There are insurance policies in business these days for many different things, one of the more popular ones now being cyber security.
Why would your CFO look at your insurance needs?
- to have a predictable cost for the security of the insurance policy. This allows the risk to be covered at a predictable value. If a crisis were to happen to the business, that coverage would bring the company back up to functioning. Without the insurance - it would be impossible to predict what a crisis could cost the organization and when it could happen.
- to have a broker conduct a thorough risk assessment for the business. As part of the insurance purchasing process, an insurance broker will often meet with the business owner and discuss what is happening within the organization and the needs or changing needs where insurance may play a role. The broker may also see other areas of the business that no one else is considering in their review where there is risk, and the management/owners may want to consider looking at it.
- to ensure compliance (i.e. auto insurance or board of director coverage for a non-profit). Some insurance needs are just something that is required, Whether it is mandatory auto insurance or business liability coverage required from a contract in place - the CFO will want to review to ensure all the necessary policies are in place.
- coverage for financing/loans. Some lenders will want to see that there is insurance on specific assets that impact the loans they are giving the company. For instance, if a lender has a mortgage on a building, they will often want proof that it has insurance so that if something happens, the asset they technically still potentially own is protected.
Some business insurances to consider outside of regular auto/liability are errors & omissions insurance, directors & officers insurance, cyber security coverage, business interruption, product liability insurance, and key-person insurance.
Let me know if I missed anything that you are thankful to have!