People who start their journey in the business field often overlook one detail: insurance. Entrepreneurs tend to focus too much on the financial and strategical side of the story and they forget to focus on what is truly important in the long term: securing the business.
Insurance deals exactly with this matter, and this is the reason why all entrepreneurs should direct their resources towards it. Gathering as much information as possible about insurance could save one’s business in a few years from now on. This article should answer most questions about business insurance, from different types to coverage and rates.
Types of business insurance
Business insurance comes in a variety of types, to cover all sorts of needs that an entrepreneur might encounter in the process. Researching each of these types will give a business owner a wider image of what these insurance policies cover and how they could be helpful for their company. Here’s the list:
- General Liability. This type of insurance covers potential lawsuits in which a company may be involved, as well as the payments that may arise in the future in terms of medical issues, injuries, negligence cases or even slander. The coverage of a general liability insurance policy depends on the company that provides it.
- Errors & Omissions. This is also called the professional liability insurance and it covers the payments involved in claims that are caused by malpractice, omissions or errors that occurred in the service of customers. This type of insurance is recommended for businesses that work with sensitive information where mistakes may slip every now and then.
- Product liability. For business owners who run companies in fields such as manufacture, sales or distribution, product liability is the best type of policy to consider. It covers all the financial losses that happen due to harmful products. It is highly recommended for companies in the food industry.
- Property insurance. For bigger companies, property insurance is a necessity. It protects the building itself, equipment, documents and other business property from theft, fire and other disturbances that may occur. A policy that covers all the properties from potential perils such as this one is definitely recommended to all entrepreneurs who work with valuable goods.
- Owner’s disability insurance. This insurance policy will be activated once an entrepreneur is no longer able to work for a certain period of time because of an injury or illness. Some owner’s disability insurance policies also cover the business inventory/employee expenses besides the personal living costs and the salary of the owner. Again, it depends on what insurance company is selected.
- Employers liability insurance. If an employee sues the company for injuries that may have been caused by the company where they work, the
employers liability insurance covers all the compensation costs and legal fees involved in the process. In some states, business owners are required by law to have such an insurance policy active on their behalf. - Business automobile insurance. Conducting a business that makes use of a large number of vehicles requires a business automobile insurance policy. This will cover all the vehicles that a company is using. The insurance policy also involves injury/loss coverage in some cases.
Some relevant statistics
After tragic events such as the summer floods that happened in 2007, companies of all sizes started to invest more money in insurance, claiming around 25000 policies for disrupted businesses in that year alone.
At that time, the pay-out exceeded 1 billion pounds. Currently, 2/3 of businesses in the United Kingdom lack a contingency plan and would not be able to deal financially with a major emergency of any kind. Furthermore, after running intricate surveys, specialists found out that 7 out of 10 companies in the United Kingdom believe they would go out of business if they needed to deal with the damages caused by an unfortunate event.
The statistics are quite worrying, and there is no wonder why people invest resources into spreading information about business insurance and how hugely important it is for all entrepreneurs.
Reasons to invest in business insurance
If the information listed above is not enough, entrepreneurs should also think about these major benefits of business insurance:
- It keeps employees safe. The most valuable asset of a company is the employee. If a business owner loses its employees, it loses everything. Protecting employees during their work hours will pay off in the future, by achieving loyal, long-term employees that entrepreneurs can trust at any given point. In several states, the law requires purchasing a business insurance policy that offers employee coverage. Protecting the interests of the employees means protecting the interests of the business altogether.
- It makes the company look more professional. People tend to prefer working with companies that look professional and credible. Listing the types of insurance that the company has builds trust in the people who are interested in using the services offered by it. As an entrepreneur, having your company insured is good for business. A positive business image also attracts new employees. Job seekers always keep an eye on the licenses and insurances that a company has before applying for a listed position.
Contracts and law require it in many cases. Depending on the laws and regulations of each state, insurance policies may be required directly by the state. If that’s the case, entrepreneurs have the responsibility to get informed about these requirements and fulfil them.
For instance, if an entrepreneur borrows money to finance his business, insurance will be required through the loan agreement. Another similar case is present in customer contracts, as some may want the company to specify what kinds of insurance they carry.