Hey! It’s Casey. I’m back with my latest blog. Thanks for tuning in. Any baseball fans here? If so, you’re in for a treat. For this blog, I’ll be focusing on a story in St. Petersburg, Florida and the baseball stadium where the Tampa Bay Rays play. Looks like they may be finding another home for spring training…
So, let’s breakdown this story (or lesson learned), and I’ll go over three top hidden dangers of underinsuring your business.
Lessons Learned from St. Petersburg’s Costly Mistake
First, let’s talk about the stadium in St. Petersburg, Florida. The city faces millions in unexpected repair costs after reducing insurance coverage for Tropicana Field. According to WUSF public radio, earlier this year, St. Petersburg reduced the insurance coverage for Tropicana Field from $100 million to $25 million to save about $275,000 in annual premiums. This decision seemed sound initially, as the city assessed the risk of significant damage to be low and insurers raised concerns about the stadium’s roof durability. Little did they know, Hurricane Milton would strike it and cause significant roof damage. Now, with repair costs estimated at over $47 million (Insurance Journal), the city finds itself facing a massive financial gap due to inadequate coverage. Let that sink in for a moment. That’s a huge gap that could have been avoided.
Top Three Hidden Dangers of Underinsuring
Reducing coverage to save on premiums may seem like a good idea at the time, but it’s often a risky decision with hidden pitfalls. Let’s go over the top three.
- Unexpected Financial Exposure: Businesses are vulnerable to various risks, such as natural disasters (Hurricane Milton for example!), lawsuits, and accidents. While these events may seem unlikely, they can happen suddenly and without warning. If a business is underinsured, it might not have enough funds to cover damages, leaving the owner to pay out-of-pocket. This can cause financial strain and, in extreme cases, even force a business to close. Don’t let this be your business!
- Inadequate Coverage for Real Risks: Insurance should account for worst-case scenarios. If you own a building in a storm-prone area, for example, having adequate property insurance is essential to cover potential structural damage. While higher coverage premiums might cost more, they’re worth it to avoid the devastating financial impact of a catastrophic event.
- False Sense of Security: Some insurance coverage might make you feel protected, but if it’s insufficient, you’re not as safe as you think. Just because you’re insured doesn’t mean you’re covered for every eventuality. Businesses need to carefully assess their specific risks and choose policies that provide comprehensive coverage. Do you know if your insurance is meeting the mark?
Now that we’ve covered the pitfalls of underinsuring, let’s discuss how you can make more informed choices on your business insurance.
Making Informed Insurance Choices
How can businesses protect themselves while still keeping costs manageable? Here are four essential strategies:
- Evaluate Your Business’s Unique Risks: Every business faces unique risks. For instance, if you operate a storefront, you may need more comprehensive property and liability insurance. Take time to understand the risks your business faces and determine what coverage level is necessary to protect against them.
- Consider the Consequences of Underinsuring: Ask yourself: What’s the financial impact if an unforeseen event causes significant damage? If potential damage or liability costs are high, cutting coverage may not be worth the premium savings. St. Petersburg’s situation highlights this; the $275,000 savings is now dwarfed by millions in uncovered repair costs.
- Work with a Knowledgeable Insurance Advisor: A trusted insurance advisor can help assess your coverage needs and clarify your options. An experienced broker works with you to find adequate protection within a reasonable budget, helping identify where coverage can be trimmed without sacrificing necessary protection.
- Understand What Your Policies Cover: Reading through insurance policies can be daunting, but understanding what’s covered and what’s not is essential. Look for gaps that might leave you exposed to high costs. If necessary, ask your broker for clarification.
In addition to the strategies just discussed, it’s important to think long-term when protecting your business. I share some of my own advice below on how to protect your business.
Protecting Your Business Means Thinking Long-Term
I frequently work with business owners who overlook the bigger picture when it comes to insurance. While budgeting and maximizing profit are essential, it’s concerning to see businesses grossing $30 million annually, yet paying just 1% in insurance coverage, aiming to cut costs further. This approach, though understandable, is risky. Insurance isn’t just about meeting minimum requirements or saving on premiums; it’s a vital tool to keep your business resilient against unexpected events. Cutting coverage might save a bit on premiums today, but it could cost much more down the line. Businesses need to balance affordability with adequate protection.
St. Petersburg’s experience with Tropicana Field illustrates a crucial point: opting for inadequate coverage may appear appealing due to short-term savings, but it leaves you vulnerable to significant, potentially crippling financial losses. Protecting your business with the right amount of insurance is not an area to cut corners. It’s an essential investment in your business’s stability and future.
The Takeaway
Before deciding to cut back on insurance, consider the potential long-term costs. It’s better to be prepared for the unexpected than to find yourself underinsured when you need coverage the most.
Let’s connect and review your insurance policies to empower you to make informed decisions about your business insurance needs. By the end of our discussions, you’ll gain a clear understanding of what you’re paying for, what you might not need, and whether you want to self-insure certain risks.
To learn more, you can reach me at 530.681.1981 or ckolb@28ins.com.
Casey Kolb
Vice President/Partner
28 Insurance Agency