Running a business comes with inherent risks: An employee could get injured on the job; a natural disaster could destroy property; or a client could file suit, alleging a contractual breach.
For those and other reasons, it is important to protect your assets, both business and personal. One of the best ways to do that is to make sure you and your business are adequately insured.
Here are ten top reasons why your business needs insurance.
1. It’s the Law
According to the SBA, the law requires businesses with employees to provide particular types of insurance: workers’ compensation, unemployment and disability, depending on the state where the business is located.
Failure to carry legally required coverage could result in fines, civil or criminal penalties, exclusion from public contracts and “cease and desist” orders — all of which could cost you far more than the price of an insurance policy.
2. You Could Get Sued
We live in a litigious society. In the event of a lawsuit or liability claim, without insurance, your business could fold. One accident. One broken contract. One disgruntled employee, and it’s over. Even if you win the suit, you could go out of business due to the cost of legal defense.
Rather than worry about what could happen, liability insurance can give you peace of mind, enabling you to concentrate on what truly matters — running a successful business.
Findlaw has a list of calamities that, should they occur, could result in a lawsuit. Some are humorous, but all are worth reviewing.
3. Keeps Your Business Up and Running
What happens to your business in the event of a natural disaster, such as an earthquake or flood? P&C insurance covers loss of property — buildings, equipment, etc. — but what about the money you lose during the time your business is closed?
That’s where Business Owners Insurance (otherwise known as BOP) plays a critical role. It can help a business survive a serious disaster by protecting against loss of income.
The way it works is that the insurer pays you the income your company would have made while it was out of action (assuming it’s due to a covered loss). BOP also compensates for normal operation expenses (e.g., rent and utilities) that you would have otherwise incurred during that time.
Some companies not only choose to insure lost income but include protection to pay employees, for up to 12 months.
4. Makes You Look Credible
Here’s a reason you may not have thought of: Having insurance makes your business look credible.
Business insurance shows your prospective clients and customers that you’re a safe bet. If anything goes wrong with the work you do for them, you have a way to compensate.
That’s the reason home services companies carry the statement “licensed, bonded and insured” on their trucks and signage. It builds trust, the currency of a modern-day economy.
5. Protects Your Employees
Your most valuable asset is not the products or services you offer, the equipment you take so much care to maintain or even the brand you struggled for years to build. No, your most valuable asset is your employees, and it pays to protect them in the event of an accident.
The law requires that you carry workers’ comp, but you should also consider offering disability coverage, even if you have to charge your employees for a portion of the cost.
By the way, protecting your employees’ interests is also a good way to protect yours — against lawsuits or liability claims.
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