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How do you know what to insure?

It’s a bit of a Murphy’s Law principle that businesses often don’t really come to grips with their risk management plan (or the lack of one) till some random accident takes out a key manager or lead hand and it hits everyone what it will mean for the business.

No one can plan for everything but every business should have a sound grasp of the kinds of risks that might hit them hard.

And every business should put strategies in place to minimise risk and deal with it, if the unthinkable happens.

When you are thinking about insurable risk for your business, emotion can sometimes derail the process unless you put a framework in place to assist in the decision making process.

You also need to assess whether you can manage risk through your own resources first.

There is no one rule to apply to insurance risk as everyone’s situation is different.

However, start by brainstorming up every conceivable risk. Then divide your list into two columns:

  • What are the potentially catastrophic events that may affect your business? What are the events that could result in financial loss, cause you to substantially change your lifestyle or force you to close down your business? These are ideal risks you should think about insuring for.
  • What are the risks that might potentially cause you to suffer losses but which you could manage out of your own resources such as cash assets? Generally, you may not need to insure against these risks.

Whenever they start to work through their insurance plan, most people tend to think about things rather than people – the buildings, the vehicles, plant and equipment. You also need to factor in the impact if key people were suddenly not there to make everything run smoothly.

Do a double take and consider whether you’ve really taken human capital risk into account. What would be the effect if you couldn’t work for six months, for example?

Who are the other key people in your business? What would be the impact if they couldn’t work for six months or if they couldn’t return to work at all?

Often people make the mistake of over or under insuring in the wrong area and find there are gaps in their risk management plan.

For professional advice in structuring your risk management plan connect with your local insurance consultant. If you’re not quite sure where to start, talk to us first to help break it down.


Human capital: in a business, human capital is the sum of all the intangibles that people bring to the business without which the business would be so much the poorer.

It’s the knowledge, skills, experience, the attitudes, creativity, training and judgement that help a business reach its goals, grow and succeed.

Human capital is the total capacity of the people in the business. It is another form of wealth which can be directed to accomplish the goals of the business.

See our article on assessing and planning for human capital risk.

If you have any questions or would like further information, please feel free to contact us.