4 Reasons Your Business Must Be Properly Insured
Whether your business is run out of your home or is an enterprise, it needs insurance. To some business owners, insurance may seem like a monthly cost they can’t afford, which isn’t worth the expense. While this attitude is understandable, it’s also misguided.
The monthly outlay of business insurance can be difficult to budget, but failing to have adequate coverage can be enough to close an otherwise successful company.
Need reasons to get high-quality insurance for your business?
1. Property Loss Due to Natural Disaster
Severe weather events are getting more common, and as hurricanes and tornados cause more damage around the world, it’s very important to make sure that your business is adequately insured against property damage. In just the state of Florida, water-related events cause as much as $22 billion a year in damage. Paying for damages that result from lightning strikes, wind, and hail is enough to close even the most solvent of businesses.
It is very important, however, to understand exactly what your business insurance will cover, and what it will not. Some companies in the path of Hurricane Harvey, for example, discovered that they were inadequately insured for floods after they were under water. A trustworthy insurance company and agent will be able to explain clearly what is covered under your policy, and more importantly, what is not.
2. Loss Due to Theft
Some 30% of businesses are estimated to close due to internal loss. Internal loss can take many different forms, from employees who steal property or damage equipment to falsifying time records to stealing clients. Employees have an intimate knowledge of business practices, and that can make it easier for them to find a way to target a business.
Of course, external theft can also be a serious problem for a business, causing loss of cash, inventory, or damage to a property. Businesses may not always realize that insuring against crime is a possibility; high-quality insurance companies can, however, help offset these kinds of losses to prevent a company from losing everything due to one unfortunate experience or employee.
3. Suit Due to Negligence
Business don’t always realize that they don’t actually have to be in the wrong to be sued for negligence. If a customer or another business believes that a company is in the wrong, and a lawyer takes their case, a business will need to handle that situation in court. Legal fees can quickly run into tens of thousands of dollars, even if a case never sees a trial. Negotiating a negligence suit without a lawyer is, quite frankly, a terrible idea.
Negligence in the modern age also goes beyond the classic example of water on a floor without a “caution” sign. Companies can be charged with negligence for mishandling personal data, for example, or inadequately protecting credit card information. Parent companies can be sued if their subsidiaries were negligence, and shareholders can also sue a corporation if they believe that the company deliberately acted against its shareholders’ best interests.
Regardless of the reason that negligence can be alleged, between lawyer fees and potential damages that must be paid, even an unfounded claim of negligence can quickly take a business to the brink of failure.
4. Lost Income Due to Closure
Another factor companies forget to consider is the cost to their business if they are forced to close for a time due to weather, theft, or another unforeseen issue. A huge number of businesses close due to cash flow problems; it is obvious that maintaining positive cash flow is crucial to keeping a business running smoothly. If a company is closed for a few days, or even a few weeks, their lease or mortgage payments must still be made, utilities are still due, and other accounts must still be paid.
Insuring for time lost at work can be one of the most crucial things a business does to ensure its survival. This can be particularly true in owner-run businesses, where a sudden illness can cause an entire business to collapse. While experts often advise that a business keep at least three, if not six, months of operating expenses on hand as liquid cash, that’s not always feasible, especially for very small businesses.
While it may seem like a company can do just fine without insurance, smart businesses make sure to stay properly insured for their own benefits. Insurance can also help a business acquire loans and negotiate better terms with partners since the company shows itself to be more serious and prepared to do professional business.
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