When you’re running a business there are many risks and scenarios where you could be financially exposed if you don’t have the right insurance coverage. If you’re unsure what sort of coverage you need, you should inquire about typical portfolio policies that many business owners have in place. In the meantime, here is an overview of some highly relevant factors to take into consideration before you complete your business insurance application.
A good starting point would be to try and work out the risks that you face as a business and how you make contingency plans to negate their impacts. Some aspects of business insurance are fairly clear cut and easy to identify, such as arranging coverage to protect the building and contents where your company trades from. But many potential risks and threats to your business are less obvious but equally damaging if you don’t have insurance to cover the potential liability.
Evaluating cost and benefits
It’s unrealistic to expect that you can insure against every potential eventuality. However, when you’re running a business you should always consider whether the benefits being offered by the insurance policy outweigh the cost of the required coverage.
Keeping pace with changes
As your business grows and you expand in terms of equipment and staff your business insurance should reflect these changes. If your existing insurance coverage is inadequate and doesn’t account for any new equipment that you have added recently it could mean you are potentially under-insured, which could have a detrimental impact on your payout if you need to make a claim.
Complying with the law
Some business insurance is clearly discretionary, but there are also types of business insurance that you need in order to comply with legal requirements. For example, if you have employees in your business there is the issue of workers’ compensation and other statutory requirements depending on where your company is located. If you don’t have the correct legally-required coverage it could cost you more in fines than the cost of the policy, so check with your broker to see what you need to stay on the right side of the law.
Understanding there’s always the prospect of a lawsuit
Today’s business environment is more litigious environment than ever before; employees or suppliers can launch legal action against you for some reason or another at any time. That’s why liability insurance is an option that should be on your radar if you want to ensure that you are not left badly exposed by a lawsuit.
The veneer of credibility
It might not be a primary factor to consider when arranging business insurance but there is little doubt that having the right coverage demonstrates to your employees and customers that you take your responsibilities seriously. Having the right insurance and bonds in place can often be a selling point and denotes that you can be trusted.
Can you afford to not have business owners insurance?
If your business had to close because of a serious flood or other unforeseen disaster what impact would that have on your cash flow? Many businesses rely heavily on a regular flow of cash coming in to pay employees and suppliers and if that cash dries up because you’re unable to trade for a period of time due to the premises being damaged this could have a serious impact on your finances. Business owners’ insurance pays income that compensates for the regular level of cash that would normally be coming in so that you don’t suffer a cash flow crisis.
New business impacts
Business insurance could prove to be money well spent if it helps you to win new contracts; this is because there are various supplier- and customer-contracts that demand a certain level of insurance coverage to satisfy their requirements. For example, large organizations can often insist that you have a minimum level of liability insurance in order to be accepted as a supplier; there may also be conditions in a contract where you’re asked to protect against a potential loss or shortfall for whatever reason.
None of us can adequately predict what is going to happen at any time in the future but you can at least arrange insurance that allows your business to enjoy the peace of mind that comes with knowing that you have got things covered.
Photo Credit: David Hilowitz