Insurance assurance
Shuttered eateries should be covered
Dear John The Answer Man
Dear John: I’m a restaurateur. As you know one of the biggest business areas affected by this coronavirus crisis is the hospitality industry.
We have no way of knowing how any planned bailout is going to work — whether it’ll be fair and equitable or how long it will take to receive funding, if there is any at all.
Here’s what I’m suggesting as the most equitable and expedient remedy: All businesses within the industry at large must have insurance. Part of that insurance coverage is a thing called “business interruption,” which compensates for loss of revenue due to a variety of reasons. Viruses are generally not covered, but an argument could be that businesses were closed by government mandate.
Premiums are based on restaurant revenues. So most operations will have coverage commensurate to those revenues now lost.
Bailout funds should be directed to the insurance industry with the explicit mandate that no business interruption claims can be denied — and also with the mandate that all such claims be handled in a very expedient manner.
This will get the funds to the industry in the fastest way possible. Our industry can then continue to make essential payments such as payroll, rent, bank loans and mortgages. This too could be mandated as a condition of receiving the funds. So we would not need to lay off workers, thereby sparing the already overwhelmed unemployment benefits program.
Payroll taxes will help alleviate state and municipal costs, and other taxes generated from the payment of
rents, loans and mortgages will also play their part in alleviating state and local costs.
Put another way, it’s trickledown or -up economics that is simple to apply and will provide much greater relief than any of the other programs I see being offered now. D.O.
Dear D.O.: I think that’s a great idea. And if it works half as well as you propose, it’ll help restaurants, hotels and any other businesses that were forced to close.
There will, of course, be cheaters. And insurance companies are notoriously slow in making payments. But maybe they will surprise us this time.
And, of course, some businesses probably scrimped on the insurance. Those places would have to be dealt with on a caseby-case basis.
I like it. Thanks for writing.
Dear John: I have been following you for over 25 years.
Is there any chance the proposal that you wrote in 2004 about dipping into retirement money at a reduced tax rate could now be passed?
It would stimulate the economy and generate tax revenue. In my humble opinion, we could be heading into a nasty recession and this suggestion could help big time. L.S.
Dear L.S.: I believe it would help during a recession. And it not only wouldn’t hurt the budget deficit, it would help it, since people who withdraw money from their retirement accounts would actually pay taxes at — as you said — a reduced rate.
However, I don’t think the timing of this would be good right now. With the stock market going down, my proposal would cause people to liquidate stock positions held in their retirement plans at a time when there is already too much selling.
Once the market settles down, I’m all in favor of this again.