One of my team members unfortunately lost her home to a fire a while back, and to this day, several years later, she’s still going back and forth with the insurance company, partially related to the personal property contents of her home. Put yourself in her situation: Would you be able to list every item in your home and know when you bought it? Do you have the receipts? I know I couldn’t do it.
That made me start thinking about this not just personally, but also for anyone who owns a business. Hopefully this will never happen, but if a fire or other catastrophe struck your shop, would you be able to list all of its contents and know when and what you paid for each item?
One good first step you need to take: Once a year you should absolutely ask your CPA for a copy of your asset list. Look it over for items you’ve added since it was last updated, and for items you no longer have that should be deleted.
Next, you need to have documentation related to all those items. Obviously, keeping your receipts for every asset purchase is the best way to document it all. Another set of copies---paper or digital---of those records should probably be kept off-site as well.
I would also encourage you to once a year to walk through your shop using your phone to create a video, narrating it as you go, as another way to document what you have. Again, keep a copy of that video in a safe, in the cloud or otherwise off-site. It could help remind you visually of all the assets in your shop, so that if the unthinkable happens, you’re not remembering assets you forgot about---a grinder, a torque wrench, air hoses, etc.---until months after you’re already settled a claim.
The topic of business insurance is so important that I invited my friend David Willet from Spark Underwriters to come speak to some of my Spartan 300 20-groups. Spark Underwriters specializes in business insurance for our industry nationwide. As its website says, they are more than insurance people: they are ASE certified, I-CAR trained and involved with industry groups like AMi, the Collision Industry Conference (CIC), CIECA and many shop associations.
David shared the suggestions I wrote about here regarding documentation of your assets, and he agreed to review each member’s business insurance policy.
That led to a discussion about coverage for your employees’ tools. Your policy probably includes some type of coverage for this, but as David has found in reviewing many shops’ policies, it’s often for only a small amount of coverage---sometimes as little as $500. We all know technicians who have tens of thousands of dollars invested in their tools. So any technicians reading this article might want to check with their employer about how much coverage the shop has for your tools.
“Getting their tools covered through their own personal insurance will likely be very expensive, and it adds to the challenge of getting good insurance on the rest of their personal lines,” David said. “So having adequate coverage for their tools through the business can be a nice employee benefit at a time when shops are challenged with finding and retaining technicians. Business owners should read their policy carefully when it comes to employee tool coverage. There are usually restrictions, such as a per-tool or per-employee limit. If there’s a $1,000 per-employee limit, that doesn’t go very far. The tool box itself far exceeds that amount.”
Just like a business or home owner, David recommends technicians, too, maintain good documentation of their tools at the shop.
“We recommend that in your policy handbook, you tell them about the insurance as a benefit, but require them to provide a list and video every year of the tools they have,” David said. “That way at the time of any loss, the business already has this.”
He said business owners should understand any co-insurance provisions in their policy. Those are provisions that imposes a penalty on an insured's loss recovery if the limit of insurance purchased is not at least equal to a specified percentage of the value of the insured building or business personal property.
“You need to understand what those provisions are, and if you can get the co-insurance removed, that’s key, because then all of a sudden, all you’re doing is trying to make sure you get paid for what you have,” David said. “Otherwise, you’re having to prove you had enough insurance, or you might get hit with a penalty.”
My Spartan 300 group members really appreciated receiving David’s insights about their business insurance policies. Now is a great time to take some steps to document your company assets, and to talk with your business insurance advisor about the details of your policy.
Mike Anderson