Every retail store is different of course, so everybody has different insurance needs.
You might have a clause in your commercial lease stipulating a specific type of insurance you need to have.
Or maybe you run a retail store that’s more prone to theft than others – in a rougher end of town, or with product that’s easier to steal or resell.
Regardless of the reason, however, when it comes time to running a store closing sale in Canada, this might be a time where your insurance needs change.
Let’s take a closer look at how that works, and what you can do about it.
Why Are So Many Retailers Underinsured?
It’s common for retail stores to be underinsured.
That is, their insurance isn’t enough to cover their inventory in case of significant loss.
This is especially the case for jewellery retail businesses.
When our store closing and liquidation services consultants ask why, the most common answers are usually “insurance is expensive” or “rarely have I seen a 100% loss”.
And this might be the case for your business as well.
You might decide to underinsure yourself because you have other financial priorities, but it might also be the case that you assume you can make up whatever losses you face over the next few years.
But if living through the economic downturn and retail exodus of the last decade and the COVID-19 crisis has shown us, it’s that the next few years are anything but predictable.
Get An Insurance Quote – It May Surprise You
However, when you start to approach the end of your retail career, you can no longer afford to think that way.
Making up losses over the next few years might have suited you well in the past, but what if you don’t actually have any more next few years?
What if you plan to retire from retail in the next year or three?
This is where it’s important to talk to your insurance broker.
Ask them about increasing your retail insurance in the final years of your business.
One option is to ask for pricing on cost plus ten percent, and cost plus twenty percent, of your inventory.
You might be surprised at how little it actually costs.
If you went to a post secondary institution as well, consider reaching out to your alumni association to ask about the discounts they offer for insurance.
Even if they don’t offer commercial insurance, they likely offer home and auto insurance, so you can at least offset your increased costs.
Why Is A Plus Percent Policy Change A Good Idea?
Retail inventory management is a funny thing.
Despite how many end of season sales events you’ve run, remerchandising you’ve done to your store, and attempts at liquidating your aged inventory, you’re going to have product that’s been sitting around for a while.
Some of it may have been purchased years ago, and will cost a lot more than what they originally did to replace, if they’re even still available in the first place.
Beyond the straight cost though is the amount of time you devoted to acquiring your inventory in the first place.
There’s also the amount of time you’ll need to commit to filing your claim, following up on it, and jumping through all the red tape you’ll need to in order to actually get a payout from your insurance policy.
During that time, you’ll have to either keep your store closed or pay out more in wages than you normally would while you take care of your claim.
A plus percent insurance policy helps you cover all this.
What Does Your Insurance Policy Say?
Check the wording of your policy and how your insurer actually pays out on a claim.
Unlike personal home insurance which is most often “replacement cost,” most insurance on a store’s merchandise is “invoiced cost”, but some policies may say “inventory cost”.
If it says inventory cost this is an added incentive to regularly update you pricing from season to season or year to year when you see the increases from your vendors.
Ask your broker what info they may require if you had a claim, and make sure you compile the information and keep a copy outside the store in a safe place.
Contact Silverman Consulting And Retail Services Today
Are you considering closing your retail store in the next few years?
If so, it’s a good idea to start laying the groundwork as soon as possible, to make sure your store closing goes as smoothly and efficiently as possible.
We can help.
Contact Silverman Consulting And Retail Services today to speak with one of our experienced retail store closing consultants.
We’ll help you put everything in place so you can enjoy the next phase of your life without worry.
Contact Silverman Consulting And Retail Services today.
Silverman Consulting & Retail Services229 Yonge St suite 400,
Toronto, ON M5B 1N9, Canada
1 (888) 955-1069