Whenever we encounter a particularly shocking piece of news, we tend to assume the worst. When the videos of the West Fertilizer Co. explosion appeared on YouTube and the news of the devastation was carried across the country, it caused many people to make some wild assumptions. The fact that it occurred in the same week as the tragic events at the Boston Marathon, led many to assume some kind of connection between the two tragedies.
As it became clear that this was a horrible accident, another misguided assumption began to emerge. As the facts materialize, the factory carried just $1 million in liability coverage, while the damage from the explosion has been estimated at around $100 million. The owners assumed they had sufficient coverage or that they would never need it. They were very wrong.
The Risk Of Inadequate Coverage
Inadequate coverage often comes back to assumptions. Business owners choose reduced coverage because they assume they will be able to cover the shortfall. Others see insurance, like liability coverage, as a means to underestimate true value to keep the premium cost to a minimum. A reduced premium for something that might never happen may appear to be the ideal option. Of course, the reason you have insurance is to make sure you are covered when accidents do happen. Without that coverage, a business may not survive.
When You Assume….
At the West Fertilizer plant, an accident did happen. That accident killed 15 people. It destroyed 75 homes, a middle school, an apartment building, and a retirement center. The sheer volume of losses is still unclear. What has become clear is the company will not be able cover the losses and it will be added to the list of casualties caused by the explosion.
Underinsured risks are risks in themselves. Because of inadequate liability coverage everyone loses.
It may be easy to assume this is a special case. Disasters like this don’t happen very often. However, for an underinsured risk to cause damage, it doesn’t need to be a huge disaster. If something goes wrong and you have inadequate property or liability coverage, you will end up with the bill. And as we’ve learned, assumptions can rarely be trusted.
