These days, you can insure just about anything. You likely have insurance for your home, health and car. You might even have your pet insured. Still, you may not have taken the time to make sure your business insurance policy will protect your company from any challenges it may face.
There are currently more than 30 million small businesses operating in the US, and an estimated 75% of those are thought to be underinsured, thus being left exposed to significant out of pocket costs in the event of an unforeseen incident.
There are many types of business insurance available to choose from, and it can be overwhelming to find the one that’s right for you, but making sure you get your coverage right can save you tens of thousands of dollars. A comprehensive insurance plan can even prevent your company from being liquidated in the event you’re hit with compensation claims you cannot pay.
What are some other reasons business insurance is so important?
1. Legal obligations
In the US, a business has legal requirements they need to abide by, one of which is ensuring they have an appropriate level of employee insurance coverage. This means that workers compensation insurance is a ‘must-have insurance’ for businesses.
Although third party insurance is not mandated in most US states, business owners should understand that they are financially and legally liable for any injury that occurs on their premises, general liability insurance can provide a safety net for a company who is sued over such incidents.
2. Employee protection
Every year, millions of American workers are injured in workplace accidents, and when a company does not have an appropriate level of workers compensation insurance, injured workers can sue their employers for damages.
Aside from the legal requirement that employers hold appropriate workers compensation coverage, businesses have a moral duty to care for their employees in the case of workplace accidents.
Medical costs, the cost of ongoing rehabilitation and the cost of lost wages can be covered by workers compensation policies, which help your employees get back on their feet without the stress of worrying about bills.
3. Property protection
Just as you have insurance to protect your home, a business should consider property insurance to provide peace of mind in the event that the property falls victim to fire or theft.
Most run-of-the-mill businesses will contain an assortment of valuable items such as computers, inventory and furniture, all of which could be expensive to replace without the right insurance.
The average property insurance claim in the US is $30,000. Considering the average income of a small business owner in the US is approximately $65,000, and only around 40% of small businesses in the US are profitable, a claim of this magnitude could bankrupt a business if they were not covered by an appropriate policy.
4. Third party protection
Just as a business owner needs to protect employees working on their premises, they also need to protect any third-party people and property while on company grounds.
Your business may have members of the public on site—customers, delivery personnel or potential clients—and if any of them are injured while on your property, your business could be liable.
In addition to the third-party people themselves, a business owner may also be liable if property belonging to a third party, like a laptop or a handbag, is damaged due to negligence on the company’s part.
Public liability insurance is a great option to protect your business from unexpected expenses relating to third-party claims.
5. Disaster protection
Some disasters, such as flood, earthquake or other natural phenomena, may not be covered under other forms of insurance, particularly if a business is in an area prone to certain weather events.
Policy add-ons like business interruption insurance can fill the coverage gap this creates. If you’d like the peace of mind that comes from knowing your business has the best chance at survival during any unexpected challenges, such a policy could be right for you.
While business interruption insurance may not feel like an urgent requirement when disaster seems unlikely, COVID-19 delivered a brutal reminder to many business owners: disaster can strike at any time. Those covered by business interruption insurance may have had clauses protecting them from government mandated shutdowns, which would have been invaluable to them during the majority of 2020 when many companies were unable to do business.
There are many potential risks to plan for when you own and run a business. At any time, an employee could have an accident, a customer could slip and fall, or you could lose valuable assets to theft or disaster.
Having an action plan in place for each possible scenario, and being supported by the appropriate level of insurance is critical in ensuring your company is financially able to continue operating, and you’re able to look after the team around you.
Each business has unique insurance needs, carefully review your options to find the solution that’s best for you.