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 exorbitant 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.
Several research studies reveal that 1 in 3 small businesses in the United States have no insurance at all. Additionally, more than half of businesses that have insurance do not have adequate coverage; they are essentially underinsured. If your company 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 company for failing to prevent an accident. In the event that one of your employees is unable to 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 quite 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, if you own a car rental business, you will need a commercial auto insurance policy.
2. Accidents happen.
Over 3 million workplace injuries occur each year in the private sector, and they account for over $75 billion in workers’ compensation costs. Certain industries have more workplace accidents and injuries than others, such as construction, manufacturing, mining, and agriculture. However, accidents happen in every industry. 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. Typing on a computer all day can cause repetitive motion injuries and back pain. Workers’ compensation insurance provides protection for your employees and your small business should an accident happen.
3. You cannot afford interruptions.
In a perfect business world, nothing would cause your company to close temporarily, or make it difficult or 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 of time. 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 you with much-needed financial help when your small business experiences an interruption. This type of insurance coverage helps supplement your income if your business is not able to remain in operation. Not all insurance companies’ business interruption policies are the same, so do your research to find out 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 on a daily basis. If your business suffers damage from a natural disaster, or falls victim to theft, your property and equipment might end up being gone forever. Having business property insurance allows you to replace everything that you lost so you can keep your business running.
There are also business insurance policies that protect you against employee theft which, sadly, costs American businesses over $60 billion each year. If your employees commit dishonest acts such as computer fraud or theft of money, supplies or equipment, your insurance company will reimburse you.
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. Take a look at the various insurance companies that specialize in small business insurance to determine which one suits your needs best. The type(s) of business insurance you need to obtain will depend on several factors, such as your company’s size and industry. Some of the many types of insurance that are available include liability insurance, property insurance, vehicle insurance, product liability insurance, and theft insurance.
The information in this blog post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, investing or accounting advice. You should consult with your accountant, lawyer or tax advisor before making any business decisions.