Did you know that 40% of small businesses are uninsured and 75% of small businesses are underinsured? Put plainly, this is dangerous.
If your business doesn’t have the legal and financial protection it needs, you may find yourself paying for problems that you didn’t anticipate. This can leave your business in ruins.
Let’s change that by talking about small business insurance and why you should invest in it as soon as possible. Keep reading to learn about all of the reasons why you need small business insurance. The answers may surprise you.
1. It’s Illegal Not to Have Insurance
The Small Business Administration (SBA) tells business owners that they are required by law to have business insurance. Depending on the state that the business is in, the requirements could range from workers’ compensation to unemployment and disability insurance.
However, the SBA also states that they highly recommend that you get the right kind of insurance for your kind of business, even if this exceeds the requirements of your state. It protects you, your clients, and your employees.
If you decide to go against the law and not get the coverage that your state requires, you may find yourself with fines, civil penalties, and even criminal penalties. With this, you may receive cease and desist orders. You could even be removed from all public contracts that you have.
All of these individually and together are going to cost more than the price of an insurance policy.
Save yourself the trouble now and invest in the right kind of business insurance for your business.
2. You Might Get Sued
People will sue for anything. You might think that you’re safe, but there’s no guarantee that you are. One broken contract or one slip-and-fall accident could put your business in a courtroom.
Even if you happen to win the case, the legal fees may close your business for good.
This is where business liability insurance comes into play. Liability insurance can protect you in the case that someone does sue your business. The list of suable offenses is long, so you should protect yourself up-front so that you don’t suffer later.
3. Your Business Will Stay Afloat
When times get really bad, business insurance is there to save the day. Property and causality insurance covers the loss of property, including the building and the equipment in it. When there’s a natural disaster like a storm or lightning strike, insurance covers your business.
If you had to pay for the damages on your own, you’d likely go out of business because of the loss of money.
When a disaster hits, coverage like business income or business interruption can reimburse you the income that you would’ve normally made during the time that it is shut down. This is assuming that the insurance covers the disaster that happened. Business Income Insurance would also compensate for normal operational expenses like rent and utilities that you may have during that time period.
Some insurance plans also cover employee pay during this period of time. This is usually capped for a certain period of time, such as 12 months.
4. You’ll Look Credible
Customers, employees, and partners look for businesses with credibility. Insurance is one of the best ways to prove this.
Having insurance shows that you care about the longevity of the business and everyone involved with it. You’re protecting yourself, the business, its employees, and more by investing in insurance.
It also shows that everyone is going to be safe if something bad happens. This is especially important for companies that hold a lot of liability, like janitorial companies or auto repair shops. Having coordinated insurance will put everyone (including you) at ease.
Just think about it. Would you want to hire a contractor or mechanic that doesn’t have insurance?
There are risks with owning different kinds of companies like those risks that come with owning a restaurant or the risks that come with owning a bowling alley. Each business is unique.
Many people assume that businesses have insurance, even though this is a poor assumption to make. If you want to stand out from the crowd, you need to make your insurance known. In other words, you need to prove your credibility.
But, how can you do this?
The best way to prove credibility is to be up-front with the coverage that you have. Some businesses have phrases like “licensed, bonded, insured” in their tagline.
Saying that they’re insured is a fool-proof way of showing that they have their customers’ backs. Thus, more customers are likely to pick and choose these companies for the things that they need and want.
5. You’ll Protect Your Employees
Arguably, the most valuable asset for a company is its employees. You can fix broken equipment and find another rental space. You can replace products and improve services, but you can’t replace hardworking employees.
Your employees work every single day for you. They leave their homes to work for what you stand for.
That’s why you need to protect them to the best of your ability. The easiest way to do that is through having insurance.
As we mentioned earlier, workers comp is a type of required insurance that your business needs. However, you should also consider offering disability coverage. Even if you have to charge your employees for a portion of the cost, it’s more helpful to do that than not having it at all.
By protecting your employees, you’re also protecting yourself and your business. Having insurance is the number one way to protect yourself against any problems that may come up with an employee. If you get sued, insurance will protect you.
6. You Won’t Have to Pay for Acts of God
An “Act of God” is an event that is not caused by humans. This includes the following:
The list goes on and on. If you or another human didn’t cause the problem, it is may be considered an Act of God.
Luckily, insurance can cover you in the event that an Act of God takes place. If your small business wants to protect itself against Acts of God, you need to look into property and casualty insurance. Specifically, you’ll want to look at all-risk and peril-specific insurance.
All-risk policies cover all Acts of God unless otherwise mentioned in the policy, while peril-specific policies list particular Acts of Gods that they cover.
If you live in an area that is notorious for one or two specific kinds of natural disasters, you may be safe to choose peril-specific insurance. For example, if you live in Oklahoma, you might be interested in protection from tornado damage.
The type of insurance that you choose to protect yourself depends on the natural disasters that are known in your area as well as how much coverage you’re looking to have. If you want to be extremely safe, all-risk policies may be the best choice for you.
7. Your Human Assets Will Be Covered
As a small business owner, you need to think about more than the physical properties and elements of the business. You also need to think about the people that are contributing to your business. This includes you.
Small businesses and large businesses alike need to take care of their human assets. What happens if you have a heart attack, stroke, or another debilitating event? Even worse, what happens to your business when you die?
It’s not easy to think about these things, but you need to take care of them if you’re going to protect your business even after you’re gone.
Life and disability insurance can provide payments to cover the loss of income during a time when you physically cannot work. If you have a permanent disability or you pass, your insurance can provide funds for the purchase of your business.
There are similar policies for employees. Having this “key man” or “key person” insurance will cover you and your employees’ families if an employee were to have a permanent disability or pass.
Take these extra steps to protect yourself, your family, your employees, your employees’ families, and your business. It’s much easier to get ahead of the issue now than to wish that you had done something later.
8. You’re More Likely to Bring in and Keep Employees
People who are applying to work for your small business are going to be looking at what you’re offering. They look at benefits, flexibility, and – yes – insurance.
The better the deal that you give them, the more likely that they’re going to stay.
Having insurance is a major bonus for employees who are looking for benefits packages that include life, health, disability, and long-term care. If you don’t offer these bonuses, it’s likely that you’re not going to retain employees like you want to.
The fact of the matter is that there are other companies out there offering these kinds of benefits, and your employees will not hesitate to take advantage of those companies and everything that they’re offering.
Perks mean a lot to employees. And, as we said earlier, your employees are one of the most important aspects of your business. Treat them well, and they’ll remain loyal.
Plus, your business will grow a reputation of treating its employees well, attracting more and more applicants with each hiring cycle. This means that you’ll have the advantage of picking the best of the best for your team.
9. Your Contracts Likely Require Insurance
In the business world, there are contracts for everything. From the building your in to the equipment you’re using, you’ve likely got contract after contract to keep up with.
It’s also likely that all of these contracts require different types of insurance as broad as liability insurance and as specific as auto-detailing insurance. Here are some examples of the types of contracts that may require specific types of insurance:
- Your renting or leasing contracts may require you to carry insurance, as the landlord or owner may not cover it
- Any contracts linked to financing loans
- Your contracts with your clients
- Contracts with freelancers and partners that you work with
We suggest skimming through your contracts and making sure that you’re not in breach of any of them. If something goes wrong with the contracts, you could get in serious trouble for not having the necessary insurance.
10. You Can’t Predict What May Happen
Insurance is there to protect you and your business against all of the things that you can’t predict. There’s no way to predict exactly when a natural disaster is going to strike or an injury may take place on yoru premises. You never know when a customer is going to sue.
There are too many unpredictable things in life. Insurance is there to protect you when those things come out of nowhere.
With proper small business insurance, you can stay calm in the face of any situation. No matter what natural disaster happens. No matter what happens with employees, clients, partners, and others, you can have peace of mind.
You shouldn’t gamble with what may happen over time. In fact, it’s more likely that you’ll save money by investing in insurance.
Disasters, whether natural or man-made, are expensive. You don’t want to incur those costs independently.
By paying your designated amount to your insurance company, you’re paying for them to help with and pay for your problems later. You aren’t losing money. You’re saving for the worst.
Invest in Small Business Insurance
No matter what kind of small business you have, you need the right small business insurance. This differs for every kind of business because each business incurs different kinds of risks.
Restaurant insurance policies are going to look different from retail insurance policies. Restaurants need to worry about food poisoning, fires, natural disasters, customers suing, and more. Therefore, those establishments need insurance for those kinds of needs.
Cleaning businesses need cleaning business insurance. This may cover slip-and-fall accidents, disability, equipment malfunctions, and more. The insurance is suited to that specific business.
The bottom line is that you need to find the insurance that’s right for your business. The sooner you’re insured, the better protected you are in the case that something goes wrong.