Regarding businesses, including agricultural operations, two types of insureds often seem to be those most likely to look to manage insurance premiums via the reduction of their coverages or limits. They are, respectively, new business start-ups and business owners in the twilight of their career. Relating to Personal Insurance, the same is true; young, single individuals and older retirees are those most likely to look at cutting back coverage to save some bucks. Whether it be business or personal, it is easy to follow the logic behind this observation.
Why Businesses May be Underinsured
Businesses that are just starting out often have limited capital and may operate several years in the red before realizing a profit. Businesses with more maturity may have accumulated significant cash reserves and have more established and reliable revenue streams to help weather financial storms and unexpected losses. Additionally, loans have often been paid off and so these businesses are not required by a lender to carry Business Property Insurance, if they don’t wish to do so.
Why People May be Underinsured
Young individuals who have few assets and lower income rates don’t have a lot for someone to take if they are sued, only to find out after the fact that they have insufficient insurance limits. Certainly, wage garnishment could occur, serving to financially compensate an injured party, but the potential of that seems to be largely off the radar of most insurance buyers. Generally speaking, younger folks also tend to be more willing to assume risk before they get married and start a family. Older retirees who established a level of increased financial security or reserves, but are now operating on a fixed income, are often either better able to assume additional risk or are looking to find ways to minimize living expenses out of necessity.