Not Paying Your Insurance Premium Is a Lapse of Judgement

One year ago oil was spewing from the floor of the Gulf of Mexico blackening the ocean blue and suffocating, coating and polluting waterfowl, beaches and other sea life as residents, business owners and tourists in five states awaited to see how long before the flow would be capped. The process took much longer than anyone anticipated and while the media covered the disaster with great gusto, entire communities and industries shut down.

For restaurants, tourist spots and the fishing industry, the devastation is still being absorbed. And although BP has agreed to pay large settlements for business losses, from the best anyone can tell, the bureaucratic paperwork has turned into a nightmarish fiasco that could take longer to process than most restaurants' life span.

Of course there are ways to cover a restaurant's future against disaster. But, insurance premiums are often the first thing to contract for and the last thing to pay when finances tighten up.  On both of the failed restaurants I owned, insurance was the first expense to get placed at the bottom of the pile. Whenever I signed up for the initial insurance policy – usually before I opened when I was still cash flush - I opted for low deductibles, high coverage, and a rock solid business interruption clause. This combination made my monthly premiums soar. Of course as business in these two properties dwindled, so did the importance of my insurance coverage. I was always smart enough to cover each restaurant separately, so if I needed to cancel a policy, it wouldn't be detrimental to the successful restaurants.

Insurance for most owners isn't something that you can voluntarily opt out of. Property and casualty insurance is something that you can possibly live without, if you enjoy throwing dice in Vegas. But there is one insurance policy mandatory, under penalty of law, in all states, with the exception of Texas: Workmen's Compensation.

I know three restaurant owners who currently don't have workmen's compensation because they barely have money for rent. These owners have made the decision to have their policies lapse in hopes of business picking up so they can reactivate their policies. That won't happen. They will close their doors before contracting for comp policies again. And, they are gambling in a situation where they won't only lose their restaurants, but possibly their homes and futures.

Recently a restaurant owner in Texas, the one state where worker's compensation is an option, had a near fatal accident in his kitchen. An employee was badly burned and air lifted by helicopter to a local hospital. The bill for the helicopter ride alone was over $15,000.00. His insurance won't cover the cost of the medi-vac transport and the bill is not something the owner can dispute. For a less successful restaurant the cost of the ride could be the closing disaster.

Nobody understands the importance of insurance until it's needed.  And, by then, it's usually too late.

It's difficult to estimate the number of restaurants that didn't have insurance in the Gulf disaster, but I know there are many owners who wished they had paid their insurance premiums when they were due.