When you look at some of the costs involved when running a business, it makes sense to try to cut them a little where you can. One of the things which might seem a little superfluous is business insurance. You have to pay it either monthly or annually and yet you should hopefully never need to make a claim. Some people may even be tempted to think that they can get by without it.
This is not true. Let’s take a look at what could possibly go wrong if you do not have business insurance and someone makes a claim against your business which you need to pay.
You Have to Take a Loan
The first thing you might try to do to pay off this claim against your business is to take out a new loan to meet its costs. While business loans are very common for companies, having to do this to pay the costs of a legal claim is not what the loan is designed for; it’s what small business liability insurance is for.
If you take out this loan, you will have to factor in the repayment plan into your budget. Due to this, you may be paying more back on the loan repayments than you would have if you had just paid the insurance premiums in the first place.
You Have to Sell Some Assets
If you cannot secure funding from a loan to meet this business expense, you may decide to sell some assets to try to raise the money you need. These could be assets from your business, like stock or equipment, or it could be assets from your personal life like your car or even some property you own.
This should not be a viable option for anyone and you should try your best to ensure that you are not in this position. If you give up assets from your business, it may not be able to function in the same way it did before as you may have to sell a crucial piece of machinery. On the other hand, no-one wants to give up their home or a car they have worked hard to get. This could lead to feelings of failure and depression which are extremely dangerous if they are not confronted.
You Go Bankrupt
The absolute worst-case scenario when considering what could go wrong if you don’t have business insurance is that you could go bankrupt and you need to fold your business to survive. Here, you are left without a business and you may not have much else if you also needed to sell your assets. While starting a new business may be an option, it can be a lot more difficult if you have declared bankruptcy before.
Ultimately, all of this could be avoided if you just take out business insurance. It can provide the security blanket and the protection you need to ensure that your business is protected against claims.