As a business owner, it is imperative to know that having a business comes with inherent risks. These can include injured employees or destroyed properties.
These risks can affect the performance and reputation of your business. This is why as a business owner, you need to protect your assets and employees.
To support this effort, you must have an insurance policy that can protect you and your business. Below are the top reasons why your business needs insurance.
Importance Of Insurance For Small Businesses
Helps Retain And Attract Employees
A survey shows that 46 percent of employees cite health insurance as a positive influence in choosing their current job. It highlights the importance of insurance in retaining and attracting employees.
It shows that insurance is not only about protecting your business. If you do not offer health insurance to your employees, you may lose potential talent to a company that does.
Addresses Contract Requirements
Some business contracts will need you to have insurance in place.
For example, if you rent your business facility, you may need insurance. This is because the landlord’s policy may not cover it.
You may also need insurance when you loan money to fund your business operations. The loan agreement will likely require you to carry insurance.
Some client contracts may also need you to have insurance if things do not go as planned.
Secures Individuals And Businesses
Insurance can reduce uncertainties that you, as a business owner, face. It offers a risk mitigation mechanism against events that can cause financial distress.
Insurance supports you after financial loss due to fire or theft. It can also provide monetary compensation for mishaps related to other accidents.
Ensures Business Continuity
In a business partnership, your business may discontinue at the death of any partner. Although you can restart the company, this can still damage your business economy.
Insurance policies can provide adequate funds at the time of death. The business should have insurance for each partner equal to their interest. The partners' dependents may receive that amount after a partner's demise.
Insurance also ensures business continuity even after loss due to natural disasters. With property insurance, you can avoid business disclosure due to the tremendous loss.
Protects Human Assets
You can have company-owned life and disability insurance. It can cover the loss of income you generate in the event of your death.
The insurance can cover the sale of your interest under a buy-sell agreement. You can also have insurance in place that covers the disability or death of a valued employee.
The welfare of your employees is your responsibility as a business owner. Insurance can cover provisions for disability and old age.
A life insurance or accident and sickness benefit can cover this business need.
You can save money by investing in group life insurance. This is a more affordable type of insurance for businesses that covers an entire group of people.
Generally, employers and organization leaders use this insurance to protect employees or members. Pensions are also generally provided by group insurance.
As the policy owner, you'll have the master contract for the actual insurance policy. Your employees will receive a certificate of insurance as proof of insurance.
Group life insurance also allows employers to choose their beneficiaries.
Term insurance is a common type of group life insurance. You can receive this insurance in the form of yearly renewable term insurance.
If you have term insurance for your business, you'll have to pay for most of the premiums for your employees.
Compensates Expensive Legal Fees
If someone files a case against you or your business, you may go out of business without liability insurance. This is true even if you won a case since legal fees can be expensive.
Legal hurdles can cost you a lot of money. But, with insurance, the money does not need to come straight from your business.
Insurance For Small Businesses
Now that you know the reasons for having insurance, you need to learn the business insurance that is right for you.
You need to have insurance that covers the costs of property damage and liability claims.
Without this insurance coverage, you may need to pay for damages and legal claims. This can hurt your finances if you need to use money straight from your income.
You can buy a business owner’s policy (BOP), which combines the following in one policy:
- Business Property
Business property is also called commercial property. This policy helps protect your business site and assets. As such, its coverage includes tools, documents, furniture, and other business properties.
- Business Liability
Business liability or commercial liability protects your business from liability claims. For example, a customer injured themselves on your business property. Then, they filed a lawsuit against your company. Business liability insurance can cover the costs of that claim.
- Business Income
Business income compensates for lost revenue when your business cannot operate due to loss. This can help pay your bills and payroll. It can also keep you afloat and ride out the temporary suspension of your business.
For example, a fire damages your business, and you have to stop operations for repairs. Business income insurance can cover the lost income while repairs are underway.
Some states also require businesses to have specific insurance. These can include:
- Workers’ compensation insurance
- Unemployment insurance
- Disability insurance
Workers' compensation insurance offers support to employees who have experienced a job-related injury. This can cover medical bills and lost income.
Meanwhile, unemployment insurance covers unemployed workers. Thus, it supports those who lost their jobs through no fault of their own.
Business insurance can protect the business you worked hard to build. This is why regardless of the product or service you offer, having insurance is a must.