Estimated reading time: 4 minutes
Property damage, work-related injuries, and data breaches can happen without warning. When they do, you need as much financial protection as possible. If not, your small business could face high costs, including legal fees, that you might not be prepared for. Small business insurance can protect your business and your bank account, give you peace of mind and eliminate the need to get an emergency business loan.
The Insurance Information Institute™ estimates that 40% of small businesses in the United States have no insurance at all, as reported in the Phoenix Business Journal¹. Additionally, more than 75% of companies are underinsured by 40%. If your business falls into either of these categories, this blog article from Balboa Capital is a must-read. It explains four reasons why you need business insurance.
1. It is the law. Period.
If you have one or more employees, your small business is required by federal law to have workers’ compensation, disability, and unemployment insurance. This applies to all types of business legal structures. Worker’s compensation is designed to cover medical costs and wages that result from workplace injuries. You can also rely on worker’s compensation if an employee sues your business for failing to prevent an accident. If one of your employees cannot return to work after an injury or illness, they can use their disability insurance to meet their financial obligations. Unemployment insurance provides weekly benefit checks to people who lost their jobs through no fault of their own.
If your small business does not have workers’ compensation, you will be fully responsible for medical costs and legal fees that result from a workplace injury. Additional fines for noncompliance, which can be costly, might also be incurred. Each state has its own rules and requirements regarding insurance, so check to see if you need any additional types of coverage. For example, you will need a commercial auto insurance policy if you own a car rental business.
2. Accidents happen.
Millions of workplace injuries occur annually in the private sector, accounting for billions of dollars in workers’ compensation costs. Specific industries have more workplace accidents and injuries than others, such as construction, manufacturing, mining, and agriculture. However, accidents happen in every industry. For example, you might not associate injuries with commercial business offices, retail shops, and restaurants, but they frequently occur in these workplaces.
Wet floors, uneven surfaces, exposed wires, excess clutter, and poorly lit areas can cause people to slip, trip and fall. Even simple desk jobs present a risk of injury to workers. For example, typing on a computer all day can cause repetitive motion injuries and back pain. Workers’ compensation insurance protects your employees and your small business should an accident happen.
3. You cannot afford interruptions.
In a perfect world, nothing would temporarily cause your small business to close or make it dangerous for you and your employees to work. However, severe weather conditions such as thunderstorms, snow, high winds, and extreme temperatures (hot and cold) can force you to shut down for a short or extended period. In addition, non-weather events such as a water leak, loss of electricity, fire, equipment failure, crime/vandalism, or a security breach can also interrupt your business.
Business insurance is a wise investment that can provide much-needed financial help when your small business experiences an interruption. This type of insurance coverage helps supplement your income if your business cannot remain in operation. However, not all business interruption policies are the same, so do your research to determine what is covered.
4. You might lose assets and equipment.
Your small business most likely has assets such as computers, printers, furniture, inventory, and supplies that are needed daily. Unfortunately, if your business suffers damage from a natural disaster or falls victim to theft, your property and equipment might end up being gone forever. Business property insurance allows you to replace everything you lost to keep your business running.
There are also business insurance policies that protect you against employee theft which, sadly, costs American businesses billions of dollars each year. For example, your insurance company will reimburse you if your employees commit dishonest acts such as computer fraud or theft of money, supplies, or equipment.
Conclusion.
Running a small business without insurance is extremely risky and can result in hefty fines, lawsuits, and out-of-pocket expenses. Do not let this happen. Instead, look at the various insurance companies specializing in small business insurance to determine which suits your needs best. The type(s) of business insurance you need to obtain will depend on several factors, such as your business’s size and industry. Some of the many available types of insurance include liability insurance, property insurance, vehicle insurance, product liability insurance, and theft insurance.
Reference:
1. https://www.bizjournals.com/phoenix/news/2019/02/22/risky-business-right-size-your-insurance-to-save.html
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses the Insurance Information Institute or Phoenix Business Journal. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.