You have invested time and money in setting up a business, therefore, it helps to do everything you can to protect your assets. That is why insurance is so vital, no matter the size of the company.
However, you do not take insurance only for yourself. Anyone who may come in contact with your business can also be a beneficiary of the protection. Take the example of a car accident involving one of your company vehicles.
Ordinarily, you would have to dig into your pockets to pay some of the resulting expenses, such as repairing the other person's car or hospital bills. And that’s not all, as you will see in our article below.
1. Taking Insurance is a Requirement By Law
The Small Business Administration (SBA) highlights insurance as a legal requirement. Therefore, it’s important to take the time to find out what your state requires.
Lack of compliance can lead to criminal or civil penalties and fines, and your company will also lose the chance to compete for public contracts.
2. Protection Against Natural Disasters
It can be difficult or impossible to predict the impact of natural disasters on the business, such as tornadoes, floods, fires, and hurricanes. Yet, some companies have lost millions due to damage to property and equipment.
Some of the worst-case scenarios have resulted in the loss of livelihoods, as well as disabilities, and fatalities. Insurance may provide compensation in such times, and the business can then find a way to get back into operation from the settlements.
3. Insurance Can Ease Financial Burdens
Many risks come with running a business, such as a worker can get injuries on the job, which will require compensation. Or perhaps you may lose inventory due to fire or theft. Insurance may also step in to provide relief at such times.
Being on the road also comes with its risks. You have the option of taking car accident litigation funding , not to be confused with car accident settlement loans, which may provide cash relief, as you wait for crash settlements.
You can also take care of expenses or lost wages without dipping into your pockets or incurring debts. A benefit of is this type of funding is that it does not look at your credit score to determine whether you qualify, and, best of all, it is a risk-free cash advance and not a loan.
Another risk of running a business is the possibility of lawsuits. Whether it is a disgruntled employee or client, you may need to face the cost of legal defense.
If the other party wins the case, you may need to pay out money. In such a case, liability insurance may ease that financial burden.
4. Insurance Provides Protection for the Management
Company directors and managers also face scenarios that could expose the business to some risk. Take the example of mismanagement due to misconduct or legislative breaches. There could also be allegations around hiring, dismissal, and sexual harassment.
Management liability insurance can help take care of costs arising from such issues. Further, it may protect against losses arising from employee actions like theft or fraud.
5. Employee Protection
Employers must take specific insurance including unemployment and disability as well as workman's compensation, which can protect employees in case of illnesses or work-related injuries. These types of insurance can also help with medical care and funeral benefits.
Some employers will offer additional benefits, including disability coverage. For the company, the chances of attracting and retaining employees are higher with if they include these types of benefits.
Most importantly, in case of employee accidents or emergencies, the business does not have to settle the claims using its money.
5. Professional Indemnity for Service Providers
In the provision of a service, something could go wrong. It could be due to omission, breach of duty, or a mistake arising from an act. In such cases, the client may seek legal recourse to recoup losses.
Even if the company had public liability, it would likely not help. Such coverage does not generally protect against financial loss due to breaches of professional duty.
Professional indemnity is popular amongst industries like real estate, engineers, and consultants. The insurance company will likely tailor the policy specific to your profession.
6. Insurance and Critical Business Processes
There are different areas insurance will play a big role.
- Financing companies require some type of insurance before they can lend you money. It provides some security in case you're not able to pay back the money.
- Many contracts may be dependent on your insurance coverage. These include client agreements, and even renting premises.
- Insurance keeps the business running in cases of a calamity. Business Owners' Insurance (BOP) protects against income loss during such times.
- Insurance is a sign of credibility. Prospective clients want to know that they are dealing with a trustworthy, reputable company. One of the key areas of due diligence will likely be around insurance. Clients get peace of mind knowing that their money is safe with you, and if anything goes wrong, they do not lose since you have taken the necessary insurance cover.
- Continued smooth operations in times of disruptions and losses.
7. Public Liability Insurance Protects the Business
Third-party liability can be a big problem for organizations. Take a simple case like a customer slipping on a wet floor – if the employee is injured, there may be a possibility of a lawsuit.
Public liability insurance may provide compensation in such instances. In some instances, paying such costs out of pocket can significantly impact a business.
8. Data Management and Protection
A typical business collects a lot of sensitive data that requires proper organization and management. However, cyber-attacks are a reality most businesses have to deal with in the digital era. It is not uncommon to hear of data breaches or losses.
The company may have to deal with aggrieved clients if this happens. Cyber liability insurance protects against the impact of such lawsuits.
Insurance is critical because it protects businesses. We have looked at some of the critical benefits of taking out the right insurance. In case of any disruption to the business, the settlements may ease the financial burden.
Insurance also protects workers in case of injury or loss of income. When trying to decide on the right insurance, start by determining your business needs. It is also a good idea to get advice from experts. The right insurance might be determinative of whether you are able to keep your operations going long-term.
WHAT YOU NEED TO KNOW: The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.
About the Author
Dan has hands-on experience in digital marketing since 2007. He has been building teams and coaching others to foster innovation and solve real-time problems. Dan also enjoys photography and traveling.