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Major Risks of Not Having Business Insurance
Running a business is hard work, yet some business owners are willing to jeopardize all their hard work for the sake of saving money.
If you make this mistake, your business will be unprotected should the worst happen. Here is a quick guide to the main risks you face when you don’t take out business insurance.
Being sued is a huge risk no matter what type of business you run. It could happen at any time. A disgruntled customer could sue you if a product they bought from you was defective and caused an injury or worse.
Or a client could sue you if your advice turned out to be negligent in some way. We live in an increasingly litigious society, so don’t underestimate the risk of legal action being taken against you and your business.
The cost of defending a lawsuit can run into millions in a high-profile case. If you are protected by insurance, your insurer will defend the case on your behalf. They will pick up the bill for legal assistance and deal with it all for you.
Without insurance, the costs of defending the business against legal claims all come out of your pocket. It could bankrupt you and will almost certainly destroy your businesses.
A General Liability Insurance policy will protect you from malicious claims, medical bills if a customer has an accident in your property, and all other liabilities not covered by specialist policies. This is the one policy that you really cannot afford to be without.
Errors and Omissions or Professional Liability insurance policy protects you if you provide professional services to clients. For example, you will need this insurance if you are a building surveyor or you design a bespoke software product.
A Commercial Auto Insurance policy protects company vehicles in the event if an accident. So, if one of your drivers is involved in a major pile-up on the interstate and someone is killed, the insurance company will pay out if there is a claim filed against the business.
Losing Your Inventory and Place of Work
How would you cope if your business premises burned to the ground because of an electrical fire?
Would you be able to replace your inventory if all your stock was damaged by a flood? How would you continue running the business if your home office was burgled and you lost all our expensive IT equipment?
Insurance is there to cover all this and more. It is sensible to have a property insurance policy in place.
This will protect the fabric of the building and its contents. If anything happens, you can claim on the insurance, so you can replace essential items, repair damage, and keep your business running.
Not Being Covered for Business Interruption
Dealing with all manner of difficult events is hard work at the best of times but imagine how stressful it would be if there was a fire in your office and you couldn’t work for several weeks because everything went up in smoke.
Without insurance, your business would grind to a halt. Customers wouldn’t receive their orders. Nobody would get paid. Income would dry up.
Business Interruption insurance covers you for such an eventuality. It pays out if you are waiting for damage to be repaired or stock replaced. The payments will continue until the business is trading normally again.
The Business Will Suffer if a Key Person Leaves or Dies
In any business, there is always at least one key person. This is usually a director or the business owner, but it could just as easily be the person who runs the office and knows where all the accounts are filed and what gets paid and when.
If this person is no longer able to contribute to the business and you don’t have a contingency plan in place, it will be catastrophic. You might even lose your business.
Key Person insurance protects the business if a designated key person becomes ill, dies, or is injured and unable to contribute. It is a vital insurance policy for any small business that relies on a handful of key personnel.
You Could be Fined by the State
Having Workers’ Compensation insurance is a legal requirement, yet many business owners don’t bother with it. They see it is an unnecessary expense. They assume that nothing will go wrong, and no employee will have an accident in the workplace.
If it is just you and a photocopier, then no, you probably don’t need Workers’ Compensation insurance, but if you employ other people, you do – even if you consider your workplace to be a very low risk. Remember, even a paper cut can be serious if the person starts bleeding out!
If you don’t take out Workers’ Compensation insurance, you run the risk of being fined by the state, not to mention having to pay your employee’s bills out of business revenue. Not surprisingly, this is not a great outcome.
Don’t make the mistake of skipping your business insurance. It’s there for a reason, so research which policies you need and write them down as a business expense.