Here’s Why You Need Insurance for Your Small Business

Here’s Why You Need Insurance for Your Small Business

Tom Boman* Does your small business really need business insurance? Mostly, the answer will be ‘Yes’. Only business owners in very specific circumstances can get away with not having business insurance.

Yet many businesses in the US do not have the necessary insurance.

According to a survey by Marshall & Swift/Boeckh, three-quarters of businesses in the U.S. are underinsured by 40 percent or more.

Yet the requirement for good insurance cover is something that gets overlooked, or under-appreciated.

There are a number of things that could befall your business that small business insurance can provide coverage for. 

Small business insurance is an important tool to protect your investment in your small business, including equipment, premises, and inventory.

It can also provide protection for your employees and customers, should the need arise. Having small business insurance is a crucial part of a business continuity plan and it may be required by state and federal law.

Protect Your Investment

The average small business owner puts $40,000 into their business in the first year. That’s a big investment, and it only gets bigger the longer you’re in business. 

But just the fact of being in business can put you at risk of financial ruin. There are all kinds of things that can financially derail even a prosperous business.

You might get sued by a customer or by an employee or former employee. You might be the victim of a data breach, as small businesses are increasingly targeted by hackers.

One of your products might injure a customer, leaving them with a valid defective product claim. If there’s civil unrest in your area, your business premises could suffer looting and vandalism. 

You need to get small business insurance to protect your investment in your business, because without coverage, financial losses like these could mean losing everything you’ve worked hard for.

Ensuring you are properly protected is certainly something that any business owner needs to do to protect him or herself and your employees.

Why neglect that key requirement?

Protect Your Employees and Customers

If your industry is particularly dangerous for workers, getting small business insurance is a no-brainer. It can provide protection for employees who are working with heavy equipment or in risky conditions.

Of course, that doesn’t mean you shouldn’t put safety first, but accidents happen. They can even happen in industries and facilities that aren’t particularly dangerous by nature.

An employee in your retail store could be injured in a slip-and-fall on your premises or by boxes falling from a high shelf, for example. Business insurance can help cover the costs of medical care, disability benefits for your injured employee, and workers compensation to help them financially while they’re recovering. 

You need that kind of protection for customers, too. You never know when a customer is going to hurt themselves on your premises, and they might decide to take you to court to get compensation for injuries that they deem your fault. Many business insurance policies provide coverage for lawsuit settlements and awards, as well as coverage to help defray the costs of legal fees and court filings. 

Be Prepared in Case of Disaster

Floods, fires, and natural disasters are among the many things in life that can’t be foreseen. You never know when a wildfire or a storm might threaten your business premises, equipment, and inventory, but with climate change driving more weather-related disasters, it may only be a matter of time before your business is threatened.

You need to be prepared.

Don’t go shopping for small business insurance without assessing the level of risk your company faces from weather events and other natural disasters, like earthquakes and wildfires.

The right business insurance policy can provide much-needed coverage for weather events, fires, and natural disasters, so that your business can recover if it’s affected.

Comply with State and Federal Laws

If you’re a sole proprietor working out of your home, with no employees, and your products or services pose a low risk to your clients, then you can probably avoid getting business insurance.

However, if you have employees, federal law requires you to carry business insurance to provide coverage for disability, workers compensation, and unemployment. 

Each state has its own laws regarding what business insurance coverage small business owners need. Often, states adhere pretty closely to the federal guidelines, but it’s important to make sure you know what your state’s requirements are and meet them.

Your company could get into serious legal trouble if you’re found to be operating without the required business insurance – and that’s not even to mention the financial difficulties you could find yourself in if, say, an employee gets hurt and you don’t have disability insurance or workers comp insurance to facilitate their recovery. 

Are you running a small business? Make sure you have the right insurance coverage to protect your hard work and your investment in your company from the ravages of weather. Otherwise, you could find your business quickly circling the drain. 

Business insurance is often overlooked yet it may be required by federal law and it can protect both the business owner and his or her employees and contractors.

Author Tom Boman writes on legal and law career affairs and has been published in online sites for the past five years. His last article for LawFuel was ‘Ted Lasso’s Top 7 Tips for Succeeding in a Career’. He may be reached at news@lawfuel.com.

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