Insurance may be the last thing that comes to mind when starting a small business. After all, you’d want to focus your time, expertise, and budget on something that truly matters – the growth of your business.
But come to think of it: you’ve put blood, sweat, and tears into building that small firm of yours. Wouldn’t it be heartbreaking to see the fruits of your hard work getting all wiped out because of one disastrous event your business wasn’t protected from?
- Is Business Insurance Required?
- Your personal insurance isn’t enough
- It’s in the law
- Your industry requires it
- You have employees depending on you
- You can’t protect yourself against jail time
- You have large investments in equipment, property, or inventory
- Your business model depends on a key person
- Your area is prone to disaster
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Is Business Insurance Required?
The short answer is, “no” unless the law in your state requires it. However, like your personal health or life insurance, business insurance isn’t mandatory, but it’s highly advised. Without insurance, you may have to pay out-of-pocket for expensive damages and legal claims against your business, causing it to go through a financially devastating state.
Thinking of getting insurance for your small business? Here’s a list of the major reasons to do so.
Your personal insurance isn’t enough
If you run your small business from your home or car and you have personal insurance, you may think you don’t need business insurance. But that’s not the case.
A business insurance policy provides a level of protection your personal property or auto insurance policy can’t. That includes the damages, theft, and losses related to your business activities. You need either a business add-on or a separate business insurance policy to protect you from risk when running your business.
It’s in the law
In some countries or states, businesses are mandated by law to have insurance. Running a business without providing the required coverage could result in hefty fines, civil penalties, exclusion from public contracts, and even “cease and desist” orders. These could cost significantly more than the price of an insurance policy.
Your industry requires it
Does your firm sell a product or a professional service? What would happen if your product turns out to be defective and accidentally injures a consumer? Or one of your employees’ negligence caused further harm to your client?
That’s when liability insurance policies come in handy.
Professional Liability Insurance (errors and omissions) protect companies and their employees (like doctors, dentists, lawyers, and other licensed pros) against claims of malpractice, inadequate work, and negligence. Product Liability Insurance, on the other hand, protects against claims of injury or property damage caused by products sold or supplied through your business.
You have employees depending on you
Do you have employees working hard for your small business? Then, it’s a must to have them insured with worker’s compensation, unemployment, or disability insurance. These policies provide financial support to workers who are unable to work due to a job-related injury or illness.
You can’t protect yourself against jail time
A single lawsuit or liability claim can finish your small business in a snap if you don’t have the right coverage. It takes one accident, one broken contract, and/or one injured employee or customer to knock down everything you’ve built.
Getting liability insurance can give you peace of mind, allowing you to focus on running your business instead of worrying about what could happen.
You have large investments in equipment, property, or inventory
Most businesses require a specific infrastructure or equipment to keep them moving. For instance, café owners invest a huge amount of money in state-of-the-art coffee machines. Landlords allocate their money on tenant upgrades. Photographers and graphic artists invest in expensive, top of the line equipment for better outputs.
If your business solely depends on a physical asset, like equipment, property, or inventory, imagine how your business would recover if that particular asset suffers a total loss or breakage? Insurance can protect your business from financial ruin, should your key assets get stolen or damaged.
Your business model depends on a key person
If you rely heavily on one sought-after artist for your tattoo business, what would happen if that person resigns, gets injured, or worse, dies? You need a particular policy to protect your business while the key person recuperates or while you’re in search for a replacement.
Your area is prone to disaster
Misfortunes that endanger your business aren’t limited to events caused by human hands – you should also prepare your business for what we call in the insurance language, “Acts of God.” That includes floods, hurricanes, fires caused by lightning, and tornados.
Consider getting a small business policy, like property insurance, designed to protect you from the cost of damages due to disasters.
Talk with an insurance broker today to know what policies you need to safeguard your business.
Carmina Natividad is one of the daytime writers for Insurance Advisernet NZ, one of the largest and most reliable general insurance businesses in New Zealand, providing high-quality risk management advice for business owners. She enjoys writing practical tips and tricks, making complex finance and business topics easier to digest.