Loans and Insurance

Business Insurance: 7 Reasons Why Your Business Needs Insurance

If you own a business that takes on projects, bids for contracts or take up high operational risks, it is important to get a business insurance. Running a business comes with inherent risks that could hurt your finances and slow down operations.

You need a business insurance to protect your business from these risks and eventualities such as bodily jury to an employee or third party, accident or damage to business assets.

What is a business insurance?

A business insurance is a broad category of insurance that provides coverage and protection for a business against financial losses that may arise as a result of property damage, injuries or lawsuits.

The risk of running a business is not child’s play, and some common risks can easily ruin your business if it not covered with insurance.

Insurance will compensate you and reduce the adverse impact of risks on your business. Without insurance, you may be force to pick your pockets to compensate claims or unexpected losses, and that won’t particularly help the finances of your business.

Why do I need a business insurance?

1. A requirement of law

It is mandatory in some states in the US and many other countries for businesses to have some form of insurance in place.

If you’ve employees, you are required by law to provide some form of insurance such as workers compensation or unemployment cover for them.

Your business could be fined, charged with civil or criminal penalties or denied bids for public contract if you fail to carry out the requirements of the law on business insurance.

Usually, you could lose more in penalties and fines than what you would have paid as insurance premium.

2. Protection for employees

Employees are valuable assets, and the face of your business. It pays to cover them against workplace accidents and injuries. You are mandated to have workers’ compensation insurance cover for your employees. The worker’ compensation policy could cover for medical bills due to illness or rehabilitation costs resulting from workplace injuries.

Business income insurance covers lost income that could interrupt operations. iIt compensates you for the income you lost when you business ceases operation because an unforeseen event. This helps you to pay employees, bills and make the business running.

It is also helpful to have a business liability insurance to cater for legal costs resulting from employee claims about wrongful termination of employment, harassment, discrimination and so on.

3. Improve business credibility

Credibility is priceless in any business dealings. Customers, suppliers, financial institutions and other stakeholders would want to bet on the safety, survival or profitability of your business.

Customers want to be assured that, they can make a claim for damages should things go wrong. Suppliers and financial institutions may want a guarantee for payment of credits and loans. A business insurance can offer them that assurance, and this will help build credibility and trust overtime.

Business insurance is also useful when your involves in contract signings. It could give you an edge in contract negotiations, as your clients, customers or partners would be confident that you can pay for liability when things go south.

It also protects you from possible claims relating to contractual errors or failing to deliver on promise.  To benefit, you need a professional liability insurance cover.

Read this: 10 types of insurance for business owners

4. Cover Acts of God

What does an Act of God mean in insurance? Act of God refers to accidents or events that result from natural causes and beyond human control.

Fire caused by lightening, floods, tornadoes, hurricanes and earthquake, are just some examples of Act of Gods.

These events can ruin your business in no time, but with business insurance, you may get back up. I must state that, many insurances companies don’t offer policies to cover Acts of God typically because of the cost and extent of damage that these events could cause. 

However, an all risk policies cover for all Acts of God, while a peril specific policy could cover particular risks such as flood, fire or specific Acts of God.

A number of homeowner insurance companies in countries like the US offer policies to cover only for common Acts of God.

5. Peace of mind

There is peace of mind in knowing that, your business operations, employees and assets are covered with insurance. Situations may occur in business that maybe out of your control.

Having a business owner’s insurance to replace damaged property, compensate an employee or an aggrieved customer, could be a relief.

Typically, this is will offer you some peace of mind to concentrate on what really matters – growing your business, satisfying customers and making profits.

6. Cover for legal fees and settlements

Now more than never, the business environment has become very litigious. It is unfortunate but that is the truth. There are high chances you could be sued by anyone at anytime; an aggrieved customer, a dissatisfied current or former employee, breach of contract or third party claims.

The last stress a business owner would want to bear is the cost of legal fees over courtroom battles.

Legal cost and the possible costs of settlements could ruin your business if you don’t have business liability insurance in place to cater for them.

7. Protection for business assets

You may ask ‘how do I protect my business assets with insurance?’ If fire guts your business building, company vehicle gets an accident or machinery is damaged, insurance could replace them for you.

Even if you are using your personal vehicle for business purposes, and involved in an accident or damaged, it wouldn’t be covered by your personal auto insurance.

So, you will need a commercial auto insurance to cover it; to protect it from theft, damage resulting from accidents or injuries caused to third parties.

Conclusion

Summing up, insurance is really important as it serves as a safety net for your business should something go wrong.

You can’t predict the future, and most importantly you need peace of mind to run a successful business.

Therefore reach out to a licensed insurance agent, a broker or a registered insurance company near you for assistance.

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