Q4 has a way of putting paperwork on every business owner's desk: next year's budget, planning meetings and, for some, an insurance renewal or two.
Some may treat that renewal like a formality. Glance at the premium, sign and move on. When you're running a business, that's understandable. However, inside that stack of paperwork is a question that doesn't get asked nearly enough: What risks is this business carrying that we never actually decided to carry?
What It Means to Self-Insure a Risk
Almost every business self-insures something. Your deductibles are potential risks you've agreed to absorb. So are policy exclusions, coverage limits that haven't kept up as the business has grown and the risks people rarely name out loud.
Self-insuring isn't automatically a problem. Sometimes keeping a risk on your own books is a sensible, deliberate choice, especially when it's small or predictable enough to handle as it comes. The trouble tends to start when it happens by default rather than by choice.
Questions Worth Asking Before Your Next Renewal
None of these questions has a one-size-fits-all answer, but each is a good place to start a conversation with your insurance professional and your advisor:
Which risks are we keeping on purpose, and which are we keeping by default?
Does our coverage still match the business we run today?
If our largest deductible were to come due more than once in the same year, how would that affect our cash flow?
Who are the people this business would struggle to run without, and what happens if one of them is suddenly out?
How does our risk picture fit into our succession or exit plans?
Some answers may point toward more coverage, some toward less and some toward no change at all. Insurance can't remove every risk, and more coverage isn't automatically the right answer. What makes sense depends on your business, your budget and your goals.
Why Risk Belongs in Your Financial Plan
For many business owners, the line between the business and their personal wealth is thinner than it may look on paper. A risk left unaddressed inside the company may find its way into your family's plans, your retirement timeline or the legacy you hope to leave.
That's why we treat insurance and risk management as part of the whole financial plan, not a separate line item. My son, Kyle, wrote a bit about how that fits into the way we think about playing offense and defense. Growing what you've built and protecting it are two parts of the same job.
If a renewal is coming up, or you'd just like a second set of eyes on the risks your business is carrying, I'd love to sit down with you and talk it through.
Frequently Asked Questions
What does it mean for a business to self-insure?
Generally, it means the business absorbs the cost of a particular risk itself instead of transferring it to an insurance company. Deductibles are the most common example, but uninsured or underinsured risks count, too.
Is self-insuring a risk always a bad idea?
Not necessarily. Keeping some risk may be a reasonable choice depending on the size of the risk, the business's finances and its priorities. The key is making that choice on purpose.
How often should a business review its insurance coverage?
Many business owners review coverage at renewal. It's also worth revisiting whenever the business changes in a meaningful way, such as adding a location or preparing for a transition.