You Make the Call

A business such as the one in the given scenario faces many different types of risks. The three types of risk it faces are Property risk, Liability risk, and Personal risk. Property risk involves damages or losses to physical assets such as vehicles and equipment as well as real property damage to buildings and /or land. Liability risk involves legal actions related to business activities. This can be statutory, contractual, or a tort liability. Personal risk involves employee matters such as retirement, health, and possibly death. The various property, casualty, and life and health insurances will cover the above types of risks. Property and casualty insurance would have helped the business cope with the damage caused by arson. Typically this type of insurance insures the items at replacement value or actual cash value. It is important that the business decide if only certain items, or perils, are covered and to what extent or if everything is covered. A unique component of some property insurance is business interruption insurance which provides insurance for any loss of expected income due to property damages. This last type of insurance would have helped offset any loss of revenue during the transition timeframe. The business definitely should have had something in place to help cover some of the losses in this scenario. In the end, the owner needs to sit down and analyze cost of the insurance versus the reward of having it in place if it is needed. Insurance is one of those items that is only useful if it is used otherwise it is just an expense of the business. The more a business is able to mitigate risk and steer clear of potential hazards, the better positioned it will be for success.