Business owners have many different responsibilities. From taxes to payroll, marketing and sales to filling orders, the business owner’s day is full. That leads many of them to ignore some of the basic needs that their business can’t do without, even if they think it can. This extends even to the vital protection offered by business insurance. But business owners who want to succeed and protect their time and financial investment need to stop ignoring this important coverage and instead, start asking themselves what is business insurance and why is it important?
What is Business Insurance?
The first part of our, what is business insurance and why is it important exploration is to understand what business insurance is. As you probably know, the basic concept of insurance is protection against the financial damage that you could endure when exposed to risk. Business insurance protects those risks specific to business owners.
As a business owner, you could be exposed to risk on many different levels:
Professional risk - As a professional, you may have certain responsibilities that you are accountable for. Whether it’s as a financial professional, a medical professional or other high level discipline, you may be held to a higher standard and complex set of expectations that leave you more open to potential liabilities for missing small details. This means you could be sued for errors, omissions and malpractice.
Auto liability - If you have a company owned car or drive as part of your business, then damages that your car suffers might not be covered by traditional auto insurance. The same holds true if your employees run errands in their cars for your business.
Liability - Whether you have client assets in your care, or you have a storefront with visitors that come by, you are exposed to bodily injury liability as well as the liabilities that come with taking possession of your client’s assets, whether as part of a repair service or other business duty.
Property protection - If you own property as a business, like computer equipment, office furniture, light fixtures and the like, then you need some sort of insurance protection because if your property is damaged, you need to be able to replace those items quickly in order to keep your business running, and insurance protection can help you do that.
Why is Business Insurance Important?
As an entrepreneur, you have invested massive amounts of time and money building your business. After doing so, you probably expect (or at least hope) that your business will in turn provide profits that enable you to pay yourself and support your family.
When an insurable incident occurs and you suffer a loss, this can put your entire business at risk. Not only does this then create a net loss of all that you’ve put into the business, but it also hurts your future income expectations, creating a domino effect of loss that can extend far into your personal assets. In a worst case scenario, this could mean the loss of your home, your retirement savings, and—of course—your ability to conduct business. With business insurance, there is no unnecessary risk exposure. You simply acknowledge the risks you face, pay an insurance company a premium that represents the appropriate amount to cover for the possibility of these incidents occurring, and then get your insurance benefits if they do. This means your business stays ‘in business’ and you don’t need to access personal funds to make up for business losses.
Business insurance also makes it easier to find investors and get financing. If you need a capital infusion for your business, investors and financial institutions will want to see that you have insured yourself against risks so that there is one less opportunity for financial loss in the event that they decide to invest in you.
Finally, business insurance can also help your clients see you as a more professional organization. If your clients are depending on you in order for their businesses to run, or for their personal needs to be met, then any losses you sustain that impact your ability to operate your business also affect them. Having insurance presents a professional image to them that will help you get more clients.
In this litigious society, insurance is a no brainer. In exchange for a small monthly or annual premium, you are given protection that can keep your business up and running and your personal assets untouched even in the face of a lawsuit.