Small Biz Lessons Learned: Insurance

Theft, damage, or fire loss of equipment can put a small business out of business if the company does not have the proper insurance coverage. Unfortunately, I learned this lesson the hard way. I have been the owner of J. & K. Lawn Care for over 10 years and in all that time I have never had an equipment claim. That is, until a fire in the trailer destroyed it and all of its contents. All of my lawn care equipment was in the trailer ready for the first mow of spring.

On the Sunday of the fire, I learned the importance of insurance, and knowing your policy.
First off, I was under the impression that I had full replacement coverage for all my equipment and the trailer. NOT! When I called the insurance company, I was surprised to learn I had insurance for the current value of the mowers, a limited amount for the other contents of the trailer, and since the trailer was not hooked to my vehicle, the trailer itself was not covered. Furthermore, since I was using the trailer for business and not personal use, even though the trailer was on my property, homeowners insurance would not cover the trailer.

One of the things I did have was rental coverage in case my equipment was damaged or stolen so that I could continue business. This was a great asset as I spent over $3,000 renting equipment while I negotiated with the insurance company over coverage and value. In the end, I only received a check for about half of my initial investment.
I have had to finance and purchase several replacement pieces of equipment and this unforeseen expense has hurt my company. I had money set aside for investing in other projects that will have to wait.

If I have learned anything from this experience it is that you need to truly understand your personal business insurance. First off, you need REPLACEMENT VALUE on all equipment, not just the fair market price. You should also have coverage for the cost of RENTING equipment in the case of an emergency. It took me almost two weeks before I got a check from my insurance company, without that coverage I could have lost several customers. Lastly, if you do business from your home, make sure you have a RIDER POLICY on any building or equipment that you use as part of the business. Your homeowners insurance probably does not cover any damage caused from doing business from your home or outbuildings.

It was an expensive lesson, but I hope I’ve helped some of you.

John Shepherd, Walsh College Adams Fellow