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Why Small Businesses Should Get Business Insurance

Running a business can be both challenging and rewarding, irrespective of the fact whether the business is a side-hustle or a full-time gig. You need to put in a lot of work and determination to build and grow your business.

So, have you considered getting protection for your business?

Numerous risks are associated with running a business successfully. An employee could get hurt while on the job, a client file a lawsuit, or a natural disaster could destroy your business premises and equipment. For these and many other reasons, it’s fundamental to protect your business. Small business insurance is a remarkable way to protect your business.

Without a particular business insurance policy in place, you won’t have the coverage for business-related claims. Your business needs an insurance policy to recover from loss or damages.

Here are 16 reasons why your business needs insurance:

1. It is Required by Law.

Most states require small businesses to have insurance. Even if you don’t have insurance for your business, you should view it as a necessary expense.

Without business insurance, you can suffer losses. Such incidents may include the following cases:

  • A fire burns your premises and inventory down.
  • A customer files a lawsuit against your business after getting hurt in your premises.
  • You lose your clients’ personal information.

On average, most states require small business owners to have workers’ compensation insurance, as soon as they hire their employees. If you have business vehicles, you’ll also need commercial auto insurance.

Failing to comply with state insurance regulations can result in fines and criminal or civil penalties. Your business may also be excluded from public contracts. This will cost your business more than the price of an insurance policy.

2. To Protect Yourself from Lawsuits.

You’ll be making a grave business mistake if you think you don’t need business insurance because your clients would never sue you. Any company is prone to legal issues and cases. Lawsuits could be caused by many events and have various effects on your business. Sometimes, it could be used strategically to identify or protect liability.

For example, if the work you are doing for a client is part of a more significant contract, the client may have to sue you to eliminate their liability. The client may have no other option but to initiate a lawsuit against you.

Other causes of litigation in business could include workplace accidents, broken contracts, and unsatisfied employees, among others. Sometimes, even if you win the case, you might be at risk of business closure due to the lawsuit’s cost. However, liability insurance, such as those from Krywolt Insurance Brokers, can give you peace of mind.

3. To Cover Your Employees.

When running a business with a number of employees, your responsibility increases substantially. The most valuable asset in your business is not your expensive equipment or services you offer. Instead, your employees are your most valuable asset, and that’s why you should protect them.

Workers’ compensation insurance provides some benefits, in case your employees suffer work-related injuries or illness. These benefits include:

  • Medical care
  • Missed wages
  • Funeral expenses

The law often requires you to have workers’ compensation insurance. However, you should also consider having disability coverage, even if you will have to charge your employees.

Other forms of business insurance, such as liability insurance, protect employees’ livelihoods by offering financial protection by making payment on a judgment. This removes the financial burden of the company’s concern.

4. To Cover Your Customers.

With a Business Owner’s Policy (BOP), your business insurance policy can also help you cover your clients. The BOP policies consist of business liability and property coverage. It helps protect your business from bodily injury, property damage, product liability, and personal and advertising injury.

For instance, BOP can cover medical costs for your client if they slip, fracture their bones, and need to go to the hospital.

Data breach insurance also protects your company and clients if a security breach occurs. The coverage helps pay for the following:

  • Legal Fees
  • Public Relations
  • Liability
  • Identity protect solutions

5. To Cover Substantial Investments.

Most companies and businesses require some forms of infrastructure for their day to day activities. For example, a graphic designer or photographer will have to invest heavily in photography equipment and technology. A carpenter or metal artisan needs a substantial investment in the necessary tools of the trade.

A business insurance policy will cover your investment in case of damage, theft, or any other disaster. This means that you can replace your investment in a timely way.

6. Your Personal Insurance is not Enough.

Even when you have personal insurance for your home and car, and run your business from there, it’s likely you won’t be covered for your business-related damages and losses. You will need a separate business insurance policy to help protect your business from any risk.

For example, if you’ve met with an accident while driving for your business, or while using a ride-sharing service, the personal auto insurance policy is likely not to cover for the damages. The same applies if there are damages to your business equipment at home.

When not sure whether a business insurance will give you additional coverage, you need to speak to an insurance agent. You’ll learn what exactly is covered by your existing personal insurance and where you’ll need to consider a business insurance policy.

When searching for the right insurance company, customer reviews such as this video can come in handy before making a decision:

7. You Have a Small Business Loan.

A small business loan provides a vital boost when you need to expand and grow your business. However, your loan application can be a nerve-wracking process. The lender might completely turn down your request or charge you an exorbitant interest rate because you lack business insurance coverage.

Most lenders require you to have small business insurance coverage after taking a loan to help protect your business. This benefits both of you as it ensures your business keeps making loan repayments even in the event of a disaster. Just as it applies to homeowners with a mortgage, expect to have insurance if you have a loan.

Business insurance is a remarkable way to manage risks. It also demonstrates to your lender that you value protecting your investment.

8. Enhances Your Credibility.

The benefits of business insurance go further than protecting your business from risk. Business insurance makes your business look credible. With the right policies, your clients and contractors see that you take managing risk seriously.

This shows your prospective clients and contractors that you are a safe bet. In case anything happens to the work that you are doing for them, you have a way to compensate. This builds trust, which is the modern-day currency.

9. Contracts May Require it.

Companies and businesses like yours often use contracts. That is why many contracts require insurance protection. You need to factor in several variables when it comes to contracts and insurance. They might include the following:

  • You may need an insurance cover when renting or leasing a business facility. The landlord’s policy may not cover you.
  • When you borrow money to finance your business equipment, goods, or building, the loan agreement is likely to have an insurance agreement.
  • Client contracts may require you to have an insurance cover in case things don’t go as planned
  • Freelancers may get a job then lose it because they didn’t realize they need an insurance cover

Don’t be overconfident and think that a contract is trustworthy and will completely protect you from lawsuits. Complications occur sometimes, and suits become unavoidable. Business insurance will protect your business ins times of such needs.

10. Uncertainty of the Future.

No one can predict what’s going to happen in the future. It would be excellent if natural calamities, disasters, job losses, injuries, and lawsuits won’t ever happen. However, nobody can guarantee that they won’t occur.

For this reason, it’s best to have business insurance coverage.

11. Keep Your Business Up and Running.

Any unforeseen event and hit a business hard and lead to its death. Businesses are affected in case of a natural disaster such as floods or an earthquake. A personal insurance cover will cater for property lost during the calamity. But what happens to the money lost during the period when the business remains closed?

This is where a BOP plays a critical role. It helps protect your business against loss of income and survive any severe disaster.

Your insurer pays you the amount your business would have earned during the closed period, if it’s due to a covered loss. BOP also caters to ordinary operational expenses, such as rent and other utilities, that would have been incurred during this period.

Some companies also go a step further and include protection to pay employees for up to 12 months.

12. Helps Attract and Retain Top-Talent.

An insurance policy for your business isn’t only about protection from unprecedented events and damages. You can also use it as a means to attract and retain qualified staff. Employees look for more than just the salary when searching for jobs.

Job seekers also look for other perks such as health, life, disability, and long-term care insurance. If your business doesn’t offer such insurance-based benefits, you miss out on attracting and retaining the best talent. You may also lose your top employees to other companies that offer such perks.

13. Protect Human Assets.

Any business owner is tasked with keeping the business running. However, some unprecedented events can still occur and keep the owner out of business for weeks, months, or an entire lifetime.

A life and disability insurance cover help provide payment to cater for loss of income for critical persons in a business. These persons include the owner, CEO, or manager. In case of disability or death, the insurer provides funds for the purchase of the personnel’s interest. This is done under a buy-sell agreement.

14. You Have a Lapsed Business Insurance.

Often you may have had business insurance before, but it lapsed as you set your concentration to other priorities. Gaps in your insurance coverage are as bad as no coverage at all. Insurance works best when there are no gaps in your coverage.

Your efforts and determination determine your success in business. However, you need to realize that there are too many factors that you can’t and don’t control. Insurance protects you when and if those factors go either way.

15. To Participate in a Tradeshow.

Participating in events such as tradeshows and farmers markets allows small business owners to network and meet likeminded people in the same industry. Small business owners can benefit from these events by discussing challenges and solutions and sparking conversations that help in business growth.

You can also host such events to encourage growth within your company. You can show appreciation for your customers and employees for their loyalty and handwork. The benefits of participating or hosting such events are innumerable, but you’ll be asked to show proof of insurance coverage. It is common for a venue to ask for proof of insurance coverage for a certain amount before granting access.

The amount and type of insurance coverage depends on the event’s particulars. For instance, participants may be asked to have alcohol exposure coverage in their policies if the event involves alcohol. This is common for retail and not-for-profit organizations.

Events that may require you to have insurance include:

  • Tradeshows
  • Job Fairs
  • Conventions
  • Speaking Engagements
  • Company Gatherings
  • Award Presentations

16. Gives You Peace of Mind.

Even when you live in countries where disasters are less likely to hit, you aren’t completely assured of safety. Wishful thinking doesn’t give you any coverage until you take action. Many variables are beyond our control, and the best way to have peace of mind is to act responsibly. With a good business insurance policy, you get peace of mind knowing you have a safety net in case of any emergency situation.

Final Thoughts.

Running a business has a fair share of challenges and rewards. While you may put in a lot of work in building your business, some events and disasters are inevitable. That’s why you need protection to cover your business from events that may result in business loss or damages. Hence, business insurance is the best way to cushion your business.

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Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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