As an owner of one of the millions of small businesses in the U.S., you already know there’s a great deal of work that goes into its operation.
If the unforeseeable were to happen, would you feel secure in knowing that you had protected your business? Unfortunately, not all companies carry adequate insurance coverage and risk increased liabilities and associated costs when things go wrong.
You may think that all you need is a general liability policy or nothing at all since you work from home online, but that doesn’t mean threats don’t exist. Let’s look at why coverage is so crucial for businesses in any industry and consider five reasons why insuring your business is essential.
Why Insuring Your Business Is a Must
When researching business insurance, it’s important to remember that you’re buying a sense of protection. These policies act like an umbrella that covers you if a natural disaster destroys your office building or your employees make a mistake that causes your client financial harm.
Still, buying something intangible can be difficult to justify at times. It’s hard to imagine the value of buying something you don’t actively use. But, without it, your company could face financial devastation, reputational harm, and a host of other negative impacts.
It’s important to understand that business protection should be tailored to your company’s unique needs and challenges. The coverage and policy options you choose will depend on your industry, business type, and more. A great example of this fact is workers’ compensation law requirements. In addition, the state you operate in could require you to carry coverage for business partners or not at all if you are an LLC.
1. Keeping Customers and Employees Safe
As a business owner, you have a duty to provide your employees with a safe working experience. However, you also need to ensure that your services, goods, or professional advice don’t cause your clients harm.
The best way to achieve this goal is to have comprehensive liability coverage. Your employees will appreciate knowing that you have a business policy to absorb the damages if they get hurt on the job or make a mistake. The same applies to your customers in that should they slip and fall at a store you own or a product you sold them is defective, they can trust you to make things right. This goes a long way in building loyalty with your market.
2. You May Not Get Any Business Without It
Business owners are often surprised to find out that even if their state doesn’t require insurance coverage, their local government might. Unfortunately, this is often the case regarding general liability, workers’ comp, and commercial auto coverage.
Even if you don’t have to carry these policies, you may find you won’t qualify to bid on contracts or collaborate with other businesses. However, it’s a common expectation that all parties involved in a business project or partnership carry some level of protection to reduce liability for those participating.
3. Workplace Injuries are Costly
Accidents in the workplace can occur any time on any day and aren’t always avoidable. Therefore, workers’ compensation is necessary unless your business can afford out-of-pocket damages related to an employee’s injury, worker’s compensation is necessary. All it takes is one serious accident to rack up tens of thousands of dollars in related damages, medical costs, and lost wages. In cases where a team member sustains a permanent disability, you can expect this expense to go even higher.
How will you pay for these incidents if you don’t have coverage? Can your bottom line survive a high dollar claim amount? Unfortunately, very few companies can say yes to this question and opt to buy an insurance policy to handle these situations.
4. Protect Your Assets Against Disasters and Theft
What would happen to your small business if a natural disaster were to occur? If your building sustains damage and has insurance coverage, you don’t have to worry about the cost of replacements and repairs. No matter the type of natural disaster, many insurance options are available to absorb these losses.
The same applies to instances of employee theft or vandalism. Imagine trying to repurchase tools and equipment stolen from a warehouse you own. A comprehensive policy can shoulder this cost instead.
5. Reduces the Likelihood of Lawsuits
If an employee or client files suit against you, it’s possible you might have to close your business because of the excessive legal fees associated with defending these cases. However, insurance companies provide commercial policy options to pay for your defense costs, protect your brand’s reputation, and pay for related damages and settlement costs.
Any active lawsuit without the benefit of liability insurance may be the death bell for your small business.
What Insurance Coverages Does Your Business Need?
Most business owners sign up for insurance before opening their doors. Whether you’re a large corporation or a freelance remote worker, your legal liability is still a serious threat. You could be liable for accidents on your property, even if it’s a home office.
However, it’s imperative to understand that you should tailor protection to your company’s unique needs and challenges. Variations in the types of coverage you will need will depend on your business structure. An example of this is an LLC. In some states, this business structure doesn’t have the requirement to cover partners.
Partnerships, sole proprietors, and small businesses usually consider a mix of the following policies:
General liability is one of the first types of policies that business owners buy. It covers lawsuits involving slip-and-fall accidents, property damage to third parties, product liability, and reputational damage.
Covering company-owned vehicles requires commercial auto insurance. Personal policies don’t cover accidents or sustained damage to your vehicle while driving for business.
Hired and non-owned auto insurance covers you and your employees who use rented, leased, or personal vehicles for work.
This coverage protects your company against lawsuits over professional mistakes, such as problems with work quality or missed deadlines that subtract. This is important since general liability only addresses claims regarding bodily harm, slander, and non-professional errors.
This insurance covers everything from lost wages to medical bills after an employee gets hurt on the job. Most states require companies to carry this coverage if they have at least one employee. Because personal health insurance won’t cover medical expenses for work-related injuries, workers’ compensation is a crucial protection for employers.
Cyberattacks or data breach threats require cyber liability insurance. In many states, there is a short timeframe when businesses must notify their customers and the government when these incidents occur. These policies help you navigate that process and will help pay for the fees associated with the recovery process and any damage claims brought against your business.
Don’t Wait to Protect Your Company
Owning a business comes with a great deal of responsibility. Finances, product/service quality, employee safety, customer satisfaction, and more present many challenges on any given day of the week. The financial fallout from a client lawsuit or employee car accident can be devastating without adequate insurance. This is why you shouldn’t procrastinate purchasing a comprehensive business insurance policy from the beginning. Knowing your company can weather the tough times is essential to your business plan and future growth.