Top 8 Reasons You Need Business Insurance

Business insurance is often an afterthought in the excitement of launching a new business. Cash-strapped entrepreneurs may believe they can avoid the hassle and expense of taking out insurance, but this is a game of Russian roulette.

Sooner or later, you will be found facing a lawsuit of some kind. Taking out business insurance is non-negotiable if you don’t want to take unnecessary risks with your company.

Here are the top reasons why this is an investment you must make to protect your future.

• High Out-of-Pocket Costs

The litigation costs are higher than you think, even if you successfully fight off a lawsuit. According to the U.S. Small Business Administration (SBA), the costs of small business litigation range from $3,000 to $150,000.

A business insurance policy pays only the deductible, and your insurer will cover the rest. You need insurance if you cannot afford the above costs out of your pocket.

Remember, even if a judgment requires someone else to pay your costs, there are no guarantees you will see any of that money in the near future. Moreover, it can take years to recover from a lawsuit, even as the victor.

• You Will Be Sued

Unfortunately, American culture is highly litigious. Thousands of frivolous lawsuits are lodged against businesses every year.

The Institute for Legal Reform revealed that 43% of small business owners have either been hit with a lawsuit or threatened with one.

Many people believe it won’t happen because they run a tight ship until it does. But, over time, getting sued is inevitable in today’s world.

• Protect Your Physical Assets

Your equipment, property, and inventory allow your business to do what it does best. Theft, vandalism, fire, floods, or any other type of natural disaster could lead to you losing everything.

A significant loss could lay your business low if you’ve invested heavily in state-of-the-art equipment or bulk inventory. Business insurance protects the tools you need to carry out your work. Some policies may even provide business interruption coverage, so you are not left without an income while you repair the damage.

• Cover the Costs of Arbitration

Any business that has a contract with a client also needs business insurance. However, no matter how ironclad your contract is, disputes happen in business, whether justified or not.

The costs of arbitration can set you back thousands of dollars in legal representation. Responsible business owners know that no contract is perfect, particularly if there is a miscommunication regarding client expectations.

Complications happen, but your business insurance policy can protect your company when necessary through errors and omissions (E&O) coverage.

• You Want to Apply for a Loan

Startups often need outside investment to allow them to fund new hires, equipment, and real estate. Therefore, all reputable lenders will ask for proof of business insurance when processing your application.

Working with a quality insurer so you can show your proof of insurance will increase your chances of seeing your application approved.

Lenders ask for insurance because it shows that your business is protected should the worst happen and that you are a responsible owner.

• You Have Employees

Taking on employees means you are expanding your range of responsibilities. There are types of insurance your business requires by law.

Workers’ compensation coverage is the most common type of legally required insurance imposed by individual states. Ensuring your business insurance protects your employees shows that you care about their wellbeing.

Liability insurance offers financial protection if someone is injured on your premises and requires medical attention. But, with the soaring cost of medical care, do you want to take the risk of paying these costs and more out of your own coffers?

• You are a Sole Proprietorship

Incorporating your venture as a separate legal entity, such as an LLC or S-Corp, enables you to shield your personal assets from that of the company’s.

Sole proprietorships, which are the most common business types in the country, have no such protection. As a result, if the business is sued and cannot meet its financial obligations, your personal assets will be factored into any judgment. Not only could this scenario lead to the loss of your business but also the loss of everything you have worked for.

Never assume that your business structure totally protects your personal assets. Insurance adds that layer of protection to allow you to proceed with confidence.

• You Want Peace of Mind

Perhaps the biggest benefit of business insurance is its peace of mind to business owners. Entrepreneurs may be running a relatively low-risk business in a part of the country where natural disasters are rarely a factor.

The problem is that this is an example of wishful thinking. Firms need tangible coverage as a real plan for the worst. Ideally, you will never have to make a claim through your insurer, but there are so many factors outside of your control that you cannot afford to take the risk.

An experienced agent understands that the priority for many small businesses is to reduce their costs. However, business insurance is not a static product. Today’s insurers can provide you with tailored policies that match your industry, business model, and unique risk profile.

By speaking to an insurer, you may be surprised to learn how affordable, comprehensive business insurance can be. So take action now to ensure that you remain protected, whatever comes your way.

Conclusion

Business insurance is necessary no matter what business operation you are running. Unfortunately, the fact is that so many entrepreneurs fail to take out insurance until it is far too late.

The average business insurance policy for small businesses can cost you less than your daily cup of Starbucks monthly. Do your research to track down an insurer with a good reputation for supporting their customers.

Have you taken out a business insurance policy for your organization yet?