It goes without saying that starting and running a business comes with numerous risks. Many have lost money, property and more in the pursuit of their dreams. Whilst it may seem like a normal part of running a business, most of these losses could be recovered by getting one’s business insured. This article will discuss insurance, the numerous options available for small businesses as well as how to choose an option that best suits your organisational needs.
What is insurance?
Insurance is the pooling of risk. It is the means by which organisations and individuals receive financial protection or compensation for losses from an insurance company. The individual or organisation enters into a contractual agreement with the insurance company. This agreement is called an insurance policy.
Why is it important to insure?
Insurance comes with numerous benefits for the small business owner. These include:
- Payment or compensation for losses suffered. For example if a company vehicle is involved in an accident, it can be easily replaced through insurance.
- Insurance helps you comply with legal requirements. In many instances, businesses are required by law to have some form of insurance. This can be employee insurance, motor vehicle insurance or some other applicable form of insurance.
- It provides a cushion against the uncertainties of managing cash flow. Disruptions to the operations of a business are minimized as the suffered loss can be speedily compensated at a fraction of the actual cost.
- It ensures continuity of the Business in the case of unfortunate events such as fires or theft. Since the loss suffered will be reimbursed, the business can eventually resume operations.
- Being insured can provide support for your credit application when seeking funding. It prevents you as less risky to the lender and in some instances, your policy can be used as collateral.
- It gives the insured, peace of mind from knowing they are protected from any potential loss. Many individuals make the mistake of assuming insurance is just about reimbursement whereas it is about the cover provided by the insurer regardless whether a loss occurs or not.
The 6 types of business insurance
I. Professional Liability Insurance:
This cushions a business from penalties and lawsuits due to losses caused by negligence. This could be errors and omissions or the business’ failure to achieve a certain level of profitability.
II. Workers Compensation:
once an employee is hired, the business is required by law to get insurance to cover injuries at work, disability or even death of the employee.
III. Property Insurance:
This will cover buildings, signage and equipment. It is advisable to get property insurance whether you own the building or are leasing it. This will protect your organisation in instances of vandalism, fires or break ins.
IV. Product Insurance Liability:
This is meant to protect the business from penalties or lawsuits resulting from deficiencies or damage caused by its products.
V. Vehicle Insurance:
If your business owns vehicles these should also be insured. This cover is required by law in most jurisdictions for the protection of third parties. It is wise to insure comprehensively as this also means you will be compensated as well.
VI. Business Interruption Insurance:
This protects a business from losses that could be incurred as a result of disturbances to operations. This might be a breakdown or a storm causing the business to halt operations. If insured, the business will get compensated despite not producing an goods on that day.
Tips for choosing the right insurer
• Identify and contact as many potential insurers and request quotes. This will widen your options to help you choose the best. Avoid rushing to choose the first insurer you come across.
• Find out what cover they provide as well as the terms they offer. Clarify your business’s position and what you are looking for.
• Assess all available options and choose the best fit for your business. This involves ascertaining the insurance company’s capabilities as well as its reputation. More importantly, revisit your budget to find out whether your business can afford the monthly premiums as well as their implications on your profitability.
• Once you have narrowed down your options to one, make sure that you fully understand the terms and conditions. Find out if there are additional benefits such as periodic refunds or reduced premiums for bulk payments.
• Make sure that you fully understand all the conditions that could result in nullification of your cover.
• Make an effort to fully understand the claim procedures, exemptions and timelines.
• If using a broker, make sure all the relevant documentation is delivered to you as soon as possible.
We hope you found this article very helpful and wish you all the best in your business journey. Remember to download the Business Builder- Small Business Management Suite