Starting and running a small business is no small feat. Among the various challenges that small business owners face, one crucial aspect that often gets overlooked is business insurance.
Fundera reports that almost 20 percent of small businesses fail within their first year of business operations. By the end of their fifth year, almost half of small businesses end up failing and closing shop. A big reason why so many small businesses struggle to survive is their inability to navigate various financial difficulties. Much of these financial struggles wouldn’t have existed in the first place had these businesses had proper insurance.
According to Forbes, small business insurance costs between $14 and $124 a month, depending on the business size and the type of coverage. While some small business owners might consider it an additional expense, business insurance is an essential investment that offers protection and peace of mind.
In this article, we’ll delve into a few compelling reasons why business insurance is so important for small businesses.
Protection Against Liability
Liability issues can arise unexpectedly and wreak havoc on a small business. Accidents happen, and even the most diligent business owners can find themselves facing lawsuits from customers, employees, or other third parties. Without proper insurance coverage, legal costs, settlements, and judgments can quickly accumulate, potentially leading to financial ruin.
General liability insurance provides coverage for bodily injury, property damage, and personal injury claims that might occur due to your business operations. This protection is invaluable for shielding your business’s assets and reputation from the consequences of unforeseen incidents.
Safeguarding Business Property
Whether you operate from a physical location or primarily online, your business likely has valuable assets. These could include equipment, inventory, technology, furniture, and more. Business property insurance helps protect these assets from risks like fire, theft, vandalism, and natural disasters.
For a small business, the loss of essential property could lead to operational disruptions and financial strain. With the right insurance, you can focus on growing your business, knowing that your investments are secure.
Business Continuity in Disasters
Natural disasters such as floods, earthquakes, hurricanes, and wildfires can strike unexpectedly and have devastating effects on businesses. Small businesses often lack the resources to quickly recover from such events.
Business interruption insurance is designed to cover the loss of income that occurs when a disaster forces you to temporarily close your business. It can help cover ongoing expenses, employee salaries, and lost profits while you work on rebuilding and resuming operations.
This insurance can mean the difference between closing your doors permanently and getting back on your feet after a catastrophe. The recent floods in Connecticut are a good example of how important such insurance is.
According to The Register Citizen, CT’s oldest hardware store’s owner closed down business after the latest 2023 Hartford flooding. This Connecticut business owner reports that every time such floods hit, they end up losing almost a million dollars.
At the moment, they can’t afford to continue with more floods likely to hit the city in the future. That’s why these small entrepreneurs need to get business insurance in CT. The same goes for anyone who’s running such businesses in other disaster-prone areas.
Brooks, Todd & McNeil report that the right insurance company can also help small businesses identify and insure against coverage gaps in existing policies. In doing so, these businesses can prepare for anything that comes their way, as well as work out a decent financial recovery plan.
Employee Protection and Mitigating Professional Mistakes
Employee well-being must always be a top priority for any business. Your business, no matter how small it is, is no different to this requirement.
Provide employee benefits and workers’ compensation insurance as it demonstrates your commitment to ensuring their overall well-being. Workers’ compensation insurance will cover their medical expenses as well as lost wages for on-the-job injuries.
In the service industry, errors and omissions are bound to happen, regardless of how experienced and cautious you are. Professional liability or errors and omissions (E&O) insurance protects businesses that provide professional services and advice. It covers legal costs and damages in the event that a client claims they suffered financial loss due to your services or advice.
Conclusion
As you can tell by now, the need for insurance for small businesses is paramount. Unless all these policies are in place, you’ll end up making your survival difficult in this market. It is only when all these policies co-exist that you can rest assured your business will not only survive but also thrive.