Every business needs some kind of insurance. This is an indisputable fact. Not only is it the law, but there are a lot of problems that not having insurance will cause. Most governmental agencies won’t do business with your company unless it has insurance. But why should your company have insurance? Read on to discover five (5) reasons every business needs insurance.
What is insurance?
Before discussing why businesses need insurance, it’s helpful to define it. According to Investopedia (paraphrased),
Business insurance coverage protects businesses from losses due to events that may occur during the ordinary course of business. Many types of insurance for businesses include coverage for property damage, legal liability, and employee-related risks.
Companies evaluate their insurance needs based on potential risks, which can vary depending on the company’s environment.
Before obtaining any insurance, business owners need to carefully read the policy to ensure they know and understand what is and what is not covered in their individual policy.
Reason Businesses Need Insurance #1: Business Interruption
Business interruption insurance, as the name implies, is insurance used if the business is interrupted. But what counts as an interruption? Business interruptions are for physical locations, such things like (so no drop shipping or e-bay stores would qualify)
- natural disasters such as fire, wind, or lightning
- falling objects
Reason Businesses Need Insurance #2:
Damage to Property & Injury
Business insurance that covers damage to property or personal injury to someone who is not their employee is called Liability insurance. On the other hand, business insurance that covers workplace injuries is called “Workman’s Comp.”
- Workman’s comp help pay for medical expenses resulting from an injury or illness caused by their work.
- A part of workman’s comp is disability benefits that are collected if an employee becomes partially or permanently disabled. The insurance offers partial wage replacement to allow the worker to be able to recover.
- Death benefits help cover funeral costs if your employee dies in a work-related accident. If you were buying the insurance for yourself, it would be an AD&D – accidental death and dismemberment clause
Companies that use subcontractors will typically require their subcontractors to pick up workman’s comp and liability.
Reason Businesses Need Insurance #3 Auto Accidents
The specific type of insurance companies need is called business auto. Just as you need auto insurance for your personal vehicle, so do you need insurance for your company vehicle and any other vehicles you rent or lease. Why, you may ask? Without such insurance, you can be personally liable for injuries people get from using said vehicles or if someone else crashes into your company-owned vehicles. Furthermore, in order to rent certain types of vehicles, you need commercial auto; otherwise, you won’t be able to do so.
Reason Businesses Need Insurance #4 Property Insurance
Business property insurance protects your premises, goods, and lost revenue. But remember that exclusions such as earthquakes, floods, dishonesty or fraud, and normal wear and tear might hinder your business’s ability to restart following a loss. Underinsurance exposes your company and staff to costly expenses. Consider income loss, repairs, and rebuilding before choosing an insurance plan. Choose a value depending on your capacity to rebuild and your risk tolerance.
If your coverage is based on replacement value, your premiums may climb to keep up with escalating construction costs, but your out-of-pocket expense in an emergency may be reduced. If you rent, you have other possibilities. Having the right commercial property insurance is vital after a loss. Determine what’s best for you, your company, and your workers with your provider. With the correct approach, specialists can help you decrease losses.
Reason Businesses Need Insurance #5
Misc. Events Not Covered Elsewhere
Commercial umbrella insurance covers expenditures beyond other liability limitations. Commercial umbrella insurance takes over when your other liability limits are reached.
Umbrella insurance covers medical bills, legal fees, and litigation damages like commercial liability insurance. Your company may require additional endorsements. Such endorsements include:
- Auto liability coverage for workers who rent or use their own automobiles for work.
- Employment practices liability insurance helps protect against employee litigation.
- Directors’ and officers’ liability insurance covers damages and defense expenses if they are named members of a lawsuit.
- Liquor liability insurance protects you from harm claims when you provide alcohol.
- Fire legal liability insurance covers you if you’re accountable for a fire in rented or leased premises.
Before obtaining any insurance, companies need to shop around and do their due diligence on the provider. Read reviews. If you know anyone who has the same insurance company, ask them their opinion. Comparison shop based on insurance benefits and coverage versus costs. Look into companies that offer a comprehensive package of the types of insurance your company needs instead of getting piecemeal from various companies. Also, don’t forget to ask about other services the insurance company may provide, such as bonding. In doing so, you’ll be able to find the best deals.