Budgeting Property and Liability Insurance Requirements
Very often, budgeting property and liability insurance expenditures is thought of as a simple purchase with little or few variables. Basically, one buys a policy to protect against an unpredictable loss and, should it occur, the firm will be made whole. Largely, this is true, but there are many variables. Understanding the role of property and liability insurance in the budgeting process requires attention and management of these variables. Unpredictable expenses can ruin the collective efforts of the entire firm in the accomplishment of their financial plan or mission objectives. Inappropriate attention to detail may also ruin the careers of those responsible for understanding the implications of the property and liability protection.
The purpose of this chapter is to assist the budget process through a brief and elementary discussion of financial plans. Usually the purchase of property and liability insurance is relegated to the financial manager. Often the person responsible for this program is not trained in all or some of the aspects necessary to purchase insurance such as:
- The risk management process
- Types of insurance available
- Insurance mechanisms
- Roles of insurance/risk consultants
- Role of insurance brokers/agents
- Role of other service providers
- Quantitative models for informed decisions ...