Friday, May 30, 2014

Why your business needs insurance

When creating a business the last thing a business owner wants to think about is additional, seemingly unnecessary expenses - especially if those expenses do not contribute in any way to the bottom line. However, all business owners face risks in one form or another, so protecting both their investment and personal assets is essential. 

A forward-thinking small business owner understands the various risks that may befall his business. Accordingly, he wisely takes proactive measures to mitigate against any financial loss arising from such events.  What risks may occur during the course of normal business operations? It varies, of course, depending on the type of business operations involved, however insurance coverage exists for property damage, legal liability, and employee-related risks. When people think of insurance, they generally think of items being insured against theft or damage. A jewelry store would need to be able to cover for the loss of stolen diamonds, for instance. But physical property is not a business owner's only vulnerability. Consider what might happen if one of your employees is injured on the job, a natural disaster occurs, or a business partner dies.  Protecting your investment requires purchasing enough insurance to cover your assets, material or otherwise. Although a business owner's personal assets are protected if the business is a limited liability company (LLC) or a corporation, neither is an adequate substitute for liability insurance to cover a business from losses. 

Additionally, we live in a very litigious society where nothing truly disastrous must occur for someone to file a lawsuit. The expense of hiring a lawyer to fight off nuisance suit can be the different between a start up business in the black and one in the red. Consider your customer base - is it composed of people who might try to play and win the lawsuit lottery? If so, you must insure.

Even if a business owners decides against seeking insurance, financial lenders and investors will often require various forms of insurance (fire, flood, life) before any business transaction occurs.  They simply do not wish to share the financial risk associated with any unexpected events that may befall a business. 

State governments also require businesses with employees to have a certain amount of some kinds of insurance to cover employees who seek unemployment, disability, or workers' compensation. Companies that employ road vehicles for business operations are generally required by the state to purchase commercial auto insurance as well. 

Do your homework. If you run your business yourself, at home, and do not have merchandise or stock to sell or store, your insurance needs may be few. But for all the other business owners who make and sell products, employ other to help, and rent or own facilities to do so in, you need to consult an agent about what coverage is best for your needs. 

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