5 essential reasons why your business needs insurance
Introduction
Managing a business is by and large an interesting task that comes with challenges. There are, however, certain risks that apply to all business firms, regardless of their size in the market. This is why business insurance is not only an addition but a necessity for all the businesses out there in the market.
Reason #1: Liability Protection
Problem
Your business is open to various forms of legal risks in that people can get injured while using your products or while on your premises. In the case that your company gets involved in a lawsuit, even one lawsuit can prove to be too expensive, especially for small businesses.
Agitation
A study conducted by Hiscox established that 4/10 of the total small business entities will experience nominal liability claims in the next 10 years. It may take anything between $50000 and $100,000 or more to cater for legal fees, settlements, and cНоt costs, among others.
Solution
General Liability Insurance (GLI) is insurance that your business needs to be able to shield from such claims. For any type of injury, GLI will make sure that you will not have to spend your business capital on legal fees. This usually comprises the legal fees for defending your business against lawsuits and compensations for claims and judgments, thus freeing you from worrying over amassing legal expenses.
Companies that are in sectors where there is production or sale of good liability insurance may be desirable to avoid risks that are an aspect of manufacturing substandard goods. It insures professional service providers against negligence claims, which in insurance policy is known as Errors & Omissions (E&O) Insurance.
Reason #2: Protecting Physical Assets
Problem
Physical assets such as a storefront, warehouse, or just pricey equipment are instrumental to the operation of your business. What will happen if fire, storm, or theft occurs on your property? If not well covered, then repairing or even replacing these valuable assets might prove to have financial implications for your business.
Agitation
According to the National Fire Protection Association (NFPA), it was estimated that 30% of business fires lead to property damage costing more than $100,000.In February 2020, thousands of Texas companies faced freezing pipes, property damage, and equipment damage. Most of these businesses were forced to shut down, some for good, mainly due to failure to afford insurance to cater for the costs of repair.
Solution
Commercial Property Insurance serves to ensure the safety of tangible business belongings or property. Of all property insurance types, this covers the expenses for repairs or replacement for renting or owning a commercial area after a fire, theft, vandalism, or other natural calamities. It normally also encompasses inventory and equipment.
Business Interruption Insurance may seek additional coverage, which can come in handy when you cannot do business because of damages or repairs, among others. If your retail store is shut down for a month after the fire, this insurance could replace the revenue you lost during that period.
Reason #3: Employee Protection
Problem
Employees are a key component of your company and are considered pillars of business. In case an employee is injured while on the job, you are obliged to provide for his medical bills and lost wages. Lacking coverage, it is possible to suffer tens of thousands of dollars wasted when dealing with worker’s compensation claims.
Agitation
According to the Bureau of Labor Statistics, more than 2.6 million people were injured without fatalities while at workplaces. Some injuries are characteristic of definite industries but accidents occur in a construction company and an office as well. Accidents at the workplace can be as simple as falling or as complex as working for months and then developing a long-term injury, and treatment of the injuries is expensive.
A construction worker recently lost his two fingers because of a fall from scaffolding. Medical expenses were above $200,000; other expenses that were not included are those of the wages lost during the recovery period. If the employer had not taken Workers’ Compensation Insurance, then he or she would have suffered the loss.
Solution
The Workers’ Compensation Insurance offers economic security for you as well as your employees. This insurance provides for all the medical expenditures, lost salary, and rehabilitation expenses for workers who get injured while working. In addition to that, it shields you from legal action in case of these injuries. This type of insurance is compulsory in almost all the states and not complying with such a law could lead to very big penalties.
Besides meeting the formal requirements, companies have to offer this insurance to increase the employees’ performance and make them think that you care for them.
Reason #4: Business Continuity and Reputation Protection
Problem
What becomes of business? What happens to business when an event of a catastrophic nature happens? From large-scale cyberattacks, natural disasters, and critical product defects, these events can render you incapable of operating and erode your brand equity and never be fully recovered no matter how long you try.
Agitation
The breach cost the target company $162 million in cash, besides the reputational loss that lingered for a long time. While Target as a company is large enough to absorb such a loss, many local businesses fell victim to cyberattacks and cannot afford it.
Solution
Cyber Liability Insurance has emerged as one of the most useful and essential coverages in today’s technologically advanced environment. This insurance assists in bearing the expenses that are captivating the data breach: legal expenses, informing costs, credit monitoring services, and public relations required to restore your image.
It includes Business Interruption Insurance that allows businesses to continue during recovery periods. This insurance can cover the funds you require while your outlets are non-operational because of a cyber hackers’ attack or a natural calamity that forces you to reconstruct.
To guard your brand’s image, make sure that you have the proper coverage so that if the worst happens, you can effectively and efficiently respond before too much damage is done and customers are alarmed that a company is not able to respond quickly to a crisis.
Reason #5: Compliance with Legal Requirements
Problem
There are also legal minimums of the different types of insurance depending on the type of business you have and the location it is in. Some of the regulatory requirements consist of various legal requirements that, if not met, may lead to fines, legal consequences or even closing down.
Agitation
A majority of the states in the U.S. mandate that employers who have employees must purchase Workers’ Compensation Insurance. Neglecting to do so may result in legal penalties such as fines, legal proceedings, or even vendetta. Likewise, if you have a construction firm, you will require surety bonds or any other type of insurance to secure contracts or licenses.
Again, it took one small business $10,000 in fines because it didn’t have the required insurance; this was worse than paying for the policy in the first instance. These additions can provide unforeseen expenses, which can prove to be quite inconvenient in terms of cash flow and can be prevented.
Solution
Basic insurance policies such as surety bonds, workers’ compensation, or professional liability in industries including construction, health, or transport sectors are usually compulsory. Having the right insurance can assist you in avoiding the legal issues as well as penalties that are likely to affect the operations of your business.
But it is also often some of the clients or contracts with whom you will have to arrange certain insurance policies before they employ you. These coverages not only make you conform to the regulation but also create new opportunities for you.
FAQs
Why insurance is important for business.
It provides a means of safeguarding the business against such loss that it may incur in the course of its operation as a result of such incidents.
How insurance protects business assets.
Business insurance protects the property, equipment, and inventory from hazards such as theft or destruction.
To what extent does insurance facilitate protecting the employees?
Yes, it has some protection against workers’ compensation and liability for any accidents or incidents that may occur.
Is it possible for insurance to give business entities legal defense?
There is always the issue of the legal expenses that may accompany a legal suit or a liability claim within the business and this is one area that business insurance can help.
Is business insurance mandatory?
Workers’ compensation insurance is compulsory, and the others vary depending on the kind of business that a company is indulged in.
Conclusion
Business life is not static at all; it is full of changes and they are inseparable from uncertainties. Insurance can be looked at like an umbrella; it protects the company from such events as legal suits, natural crises, or a worker getting an accident while working for the firm. Whenever it is hard to predict what may take place and each of them may be viewed as rather risky, the general concept is to prepare for them.
Insurance acquisition is not just an element of buying; insurance is required to guard businesses from any horrifying event. When you properly insure your business, the implication of this is that you are putting your business to endure in the market in the future.
Whenever possible, consult an insurance specialist who can advise you on the policies that will cover your business, specialize in it, and the dangers present in the line of business. Insurance is not a cost that is incurred but it is an investment in the future of an enterprise.