For small business owners, it’s easy to question the logic: Why do I need business insurance that’s not required and I may never use? Here are 10 reasons.
As a business owner you may recognize that not all business insurance is necessarily required. And as you crunch your numbers, you might naturally question the rationale. Why do I need business insurance that’s not required and I may never use?
The truth is that it’s worth the investment. It’s simply too risky to forgo liability insurance at the least. Small business owners need the risk protection that insurance coverage offers.
The right insurance for your small business can mean the difference between weathering the storms and going under. Types of insurance range from general liability to professional liability, workers compensation, and more. You may not ever actually need business insurance of any given type. But you’ll be glad you have it if you do. This article sheds light on 10 good reasons that back that up.
Reduces business risks
Accidents happen. That’s just how the world works, and you can’t prevent every single mishap or disaster that might impact your business. If you don’t have a crystal ball, business insurance coverage may be the next-best thing. It’ll help you recoup faster and get back up and running with minimal loss, greater stability, and a faster rebound.
Protects business owners
A single lawsuit can cause significant financial damage to a small business. Even if you win, the legal fees incurred for legal defense can be overwhelming. Lawsuits can arise from an array of circumstances, and they can cripple your business if not destroy it completely. You can’t necessarily prevent lawsuits, but the right insurance policy can protect your business assets, your personal assets, and more.
If you have employees, you have an added responsibility to ensure their protection as well. Liability insurance and workers compensation insurance are 2 that are absolutely necessary for businesses with employees. In most states, workers compensation, disability, and unemployment insurance are all mandated by law, although requirements may vary.
Liability insurance protects your business and your customers. There are 3 common types: general liability insurance, product liability insurance, and professional liability insurance. These types of business insurance minimize the impact of events concerning customers that would otherwise be harmful.
Protects against loss of income and property
Business owners’ insurance is vital for businesses suffering loss of income for covered reasons. For losses covered, policies pay what a business would have made if it were operating as normal. It can also compensate for certain operational expenses and employees’ lost income for a specified period.
Commercial property insurance protects against a variety of physical losses in most cases, excluding some by natural disaster. Protection extends to covered business property and that of others within and outside the building.
Protects in the wake of natural disasters
“Acts of God” is a term used in business insurance policies. It refers to any event or accident that did not occur due to the work of a human. This would include natural disasters such as tornadoes, storms, floods, fire caused by lightning, and earthquakes. All-risk and peril-specific insurances are the 2 types of property and casualty insurance that cover these events. All-risk insurance covers all acts of God except for those named in the policy as not covered. Peril-specific insurance lists specified risks and covers floods, fire, and other acts of God as named in the policy.
Protects in the wake of data breaches
A 2016 Kaspersky Lab study found that 1 in 5 businesses surveyed worldwide had experienced data loss or exposure due to cyber attack.¹ Further, the estimated average financial impact to a small business experiencing a single attack was $86.5k. Most small businesses cannot survive that type of loss. This makes cyber liability insurance vital. It protects the company and offers third-party coverage for various types of loss due to data breaches.
Some are state-mandated
Most states require small businesses to carry 3 types of insurance that pertain to employees: disability, unemployment, and workers compensation. A company that fails to comply by not carrying the legally required insurance risks facing consequences. Those can include fines, civil penalties, cease-and-desist orders, exclusion from public contracts, and even criminal charges. Any or all of these could potentially cost much more than the insurance policy that would have protected them.
Business insurance instills in employees trust and confidence in the company, which may aid in job satisfaction and employee retention. It’s also attractive to prospective employees who value the security and stability of a career within a company. Good business insurance can sometimes be as attractive as offering health insurance and other employee benefits.
Real estate and bank contracts may require it
If you rent or lease your office, warehouse, or other business facility, your agreement may require you to carry insurance. Lenders may also require you to have business insurance before offering financing for equipment, expansion, operations, or real estate. In fact, most loan agreements have an insurance requirement.
Why do I need business insurance? Ask a small business owner who didn’t have it when they needed it.
Having good small business insurance is just smart business. No matter the size of your business or number of employees, you need that protection. In an instant, everything can change. The right comprehensive business owner’s policy can help your business survive. So seek insurance advice, research appropriate coverage, gather insurance quotes, and secure your safety net. Having a policy that’ll flex with your business and help you overcome unexpected events can help ensure your continued success.
For more tools, tips, and resources for small and midsize businesses, visit Workest by Zenefits daily.