When you run a business, whether it’s a small store or a big conglomerate, one of the key things you need to have is business insurance. Many may argue that they are too small to need such insurance, or that the cost of the insurance is not worth the effort. Well, here are the reasons why it is necessary for every business to have insurance.
- Legal Requirement
While most types of business insurance are optional, there are many states in the US that require you to buy specific types of insurance. For example, if you have employees, then you are required to buy Workers’ Compensation Insurance by all states in the US except for Texas. Or, if you run a bar or a restaurant, then in some states, to obtain a liquor license, you need to also buy Liquor Liability Insurance.
It is best to check your state’s laws to find out what kind of business insurance you have to buy.
- Protecting Yourself and Your Business
At its most basic level, business insurance is necessary to protect you and your business from the cost of being sued or cost of repairing damages to your property.
According to a study carried out by the Small Business Association, about 53% of all small businesses face litigation at some point. Litigation can be an extremely messy affair. In fact, many businesses end up well, going out of business because of either the cost of litigation, or because of the negative sentiment generated by the event.
Either way, would you really like to take that kind of a chance with your business?
- Protection Against Natural Disasters
In the US natural disasters such as fires, floods, hurricanes, lightning and tornadoes (to name a few) are not uncommon. In fact, there are many states that live with this reality. And if such a disaster strikes, then there is nothing you can do but wait for the aftermath.
Rebuilding your business after such a disaster can be a hopeless task if you do not have the funds for it. And that is where business insurance can help.
There are two types of business insurance policies that can help you at this time: All-Risk and Peril-Specific. The first type of policies covers any kind of disaster, except for those that have been specifically mentioned. The second, Peril-Specific, will only cover specific events.
- You Need Business Insurance to Grow
You would be surprised to know that many companies will not sign a contract with you if you do not have business insurance. Here are some instances where you will not be able to push through on a contract unless you have business insurance:
- Renting a commercial space or building
- Borrowing money to fund the purchase of materials
- Client agreements
- Loan agreements
Without insurance, such contracts will not go through since the other party does not have surety of being paid back in case something goes wrong.
- Protection for Your Employees
When a person joins a company, they do so because they will get some benefits besides a salary. They want health and life insurance as well as compensation in case they suffer injuries while on the job.
When you have business insurance such as Workers’ Compensation Insurance, then you can provide medical care to your employees. They will also get missed wages, or in worst case scenarios, funeral benefits.
When you have insurance, you will be able to attract more candidates for a job than a company that does not have such a facility.
- Protection for Your Customers
If you have a Business Owner’s Policy (commonly called BOP), then even your customers are protected against injury or damages. Let’s say that your customer injures themselves on your business premises then your insurance policy will cover the cost of their treatment.
You can also look at data breach insurance, where you can protect not just your business but also your customer in the case of a hack attack or a data breach of any kind. This kind of insurance will cover the costs of identity protection solutions, liabilities if any, legal fees and even public relations efforts.
- Business Income Protection
There are times when you may be forced to close your business and therefore you lose income. This could occur because your business was damaged in a fire, or because of a natural disaster, or even a pandemic such as the current Coronavirus.
In such cases, your business insurance can help cover costs for a period of time until you get back on your feet. This way, you will still be able to pay your bills, give your employees their salaries while you work towards getting your business up and running again.
- Adds Credibility
When you have business insurance, you can use it to add credibility to your business. This kind of insurance shows your customers that you are a responsible business and a safe bet. It also gives them the assurance that in case anything goes wrong, you have a way of compensating for the losses.
This is the reason why you will notice that many businesses advertise that they are insured!
- Protects Human Assets
Your physical assets aren’t the only things that need protection when you run a business. As the business owner, you also need protection. Such insurance is called Key Person insurance.
In case you are not able to run your business because of illness, injury, disability or even death, then such insurance can cover the loss of income your company would suffer because of your not being there. It can also provide the funds required to buy out your interests through a buy-sell agreement. This way, even if you, as the key person, are no longer able to run the business, it will continue under new management.
- Peace of Mind
We cannot predict what will happen in the future. When you have business insurance, you can focus on what is really important, building your business!