10 Ways Business Insurance Mitigates Risks
All businesses face risk. There are threats everywhere, from physical damage to legal trouble to competitors selling products like yours for lower prices. There’s no way to eliminate all these risks, nor is it possible to predict or safeguard against all of them—in fact, taking risks is part of what makes entrepreneurship such a unique journey.
But the reality is, half of all businesses will fail in the first five years of operation, and if you want to maximize your chances of success, you’ll need to learn how to identify and protect yourself from as many risks as possible.
You can do this manually, hedging your bets against individual threats, and eliminating some entirely, but it’s much more efficient to guard yourself against multiple threats at once with a robust business insurance policy.
How Business Insurance Protects You
Business insurance has the power to protect your business against many different risks simultaneously, offering compensation in the event of destruction, interference, or other threats in exchange for a monthly (or other regular) premium.
These are just some of the ways that business insurance can mitigate your business’s risks:
- Building damage. If you own the building in which your business operates, whether it’s a storefront, a warehouse, or an office, you’ll need to protect it against accidental damage, or deterioration over time. A roof damaged in a storm, or a rogue car driving through your storefront’s windows can keep your building from being functional for months, and can otherwise cost tens of thousands of dollars (or more). Insurance can reimburse you for the lost productivity, as well as the cost of repairs.
- Natural disasters. Natural disasters are another area of consideration, though not all insurance policies will cover all natural disasters. Chances are, your business insurance policy will protect your business from damage due to fires and storms, but you may be responsible for an alternative policy if you want coverage from floods or earthquakes—especially if you live in a high-risk area for these specific disasters.
- Machinery breakdowns. If your business relies on specific equipment to operate, such as production machinery, all it takes is one failure to bring your business to a halt. Whether it’s a specific instance of damage or the slow deterioration of your machines over time, the right insurance policy can reimburse you for repairs, and possibly compensate you for any business or productivity you’ve lost in the meantime.
- Electronic device damage or failure. Most modern businesses rely on dozens, if not hundreds of electronic devices to manage operations. Servers, computers, tablets, and even RFID chips at the ground level are all important to ensure that things are tracked and managed accurately. Some business insurance policies can repair or replace these devices if and when they become non-operational, such as if they’re lost or damaged.
- Goods during shipment. If you ship goods to your customers, they’re vulnerable to damage along the way. A semi that’s involved in a collision could wreck tens of thousands of dollars of goods, and even a single lost shipment to a customer could cost you hundreds of dollars (or even more, for high-end items). That’s why many business insurance policies protect your goods during shipment, so you won’t have to worry about it.
- Business vehicle damage. Many small business owners don’t realize it, but your personal car insurance policy won’t protect your car if you’re using it for business purposes. For that, you’ll need a specific business vehicle insurance policy. Sometimes, you can get this as a separate vehicular policy; other times, you can roll it into your overall business coverage.
- For retail businesses, theft is a major concern. Most businesses expect to face a certain level of theft on a regular basis, but one major robbery or heist could cost you thousands in merchandise. Many business insurance policies offer a clause specifically for theft, to protect you against these kinds of losses.
- Office contents. Business insurance may also protect your company against losses of items and equipment in your office. If your equipment is stolen, or if a disaster befalls your building, you could stand to lose thousands of dollars of equipment—as well as any data that was stored on your electronic devices. A good insurance policy should be able to reimburse you for these losses.
- Your business could also find itself in legal trouble, regardless of how many precautions you take. For example, if a customer is injured on the premises of your business, if your products are found to be defective, or if you unintentionally violate a contract, you could face a hefty fine or a lawsuit. Considering the average liability suit costs at least $54,000, it pays to have some protection here. Most business insurance policies provide some degree of liability protection, affording you legal counsel and covering the costs associated with the damage done.
- Business interruption. As an entrepreneur, your business is your livelihood. If your business isn’t able to continue operations like normal for any reason, you may not be able to draw a salary or provide payments to your employees. If a car accident takes you out of commission, if your brand is the victim of a cyberattack, or if your property is damaged or destroyed, you’ll need a stream of revenue to protect what you’ve lost—and that’s exactly what business interruption insurance Your policy may protect you from specific types of interruptions, or from all possible interruptions.
Your policy doesn’t have to cover all these areas, and there are other potential areas of coverage not listed here. But no matter what your business goals are, or what types of risks you face, it’s a good idea to have some type of business insurance policy in place. If you’re interested in learning more, or getting a quote on a custom policy, take a look at King Price Insurance’s business insurance offerings, or contact us today to learn more!