Insurance Essentials for Managing the Many Small Business Risks

It takes years of hard work and sacrifice to build a successful business, but it could take just one risk exposure to end the dream. The bigger and more successful a business becomes, the more it must protect against risks that can take everything away. For growing businesses especially, managing risk is just as important as managing cash flow.

Business owners must understand the nature and potential costs of all risk exposures and then find a way to eliminate or mitigate them efficiently. For most of the more common business risks, the most efficient way to reduce financial exposure is by transferring it to an insurance company.

These are the five types of insurance business owners should have to protect against the most common risks.

Protection Against Liabilities

Business owners are exposed to a wide range of potential liabilities, any of which can subject their assets to substantial claims.All businesses should have liability coverage that protects against the following:

Premises and operational exposures: Liability coverage protects your business from claims arising from bodily injuries within your workplace or injuries or damage caused by your employees. A common accident that occurs in workplaces is when a customer slips on a wet floor.

Product and completed operations exposures: If your business manufacturers products for sale, liability insurance protects against claims arising from injury or death caused by a product.

Contractual liability exposures: Businesses that contract for work need protection against bodily injury or property damage claims by third parties.

Protecting Your Business Property

As with homeowner's insurance coverage, business property insurance coverage can protect your business against a range of risk exposures.

Building coverage: Whether you own or lease your workspace, property insurance protects your physical assets against certain known perils, including fire, water damage from a broken pipe, and storm damage. Protected assets include outdoor signage, furniture and equipment, inventory, landscaping, and the property of others.

Business interruption: Business insurance coverage will reimburse you for lost net profits and ongoing expenses if your business suffers a financial loss resulting from a temporary closing due to fire or other covered perils. You could also be reimbursed for the cost of having to temporarily relocate your business until your property can be occupied.

Intellectual property: With some businesses, their intellectual property, such as trademarks, licenses, brand names, computer codes, and patents, can be worth more than their physical property. Intellectual property coverage can protect your business against the loss, damage, or theft of your valuable intellectual capital.

Employee dishonesty: Employees theft and dishonesty are the leading causes of business bankruptcies. Employee theft coverage can protect your business against financial losses arising from employees' fraud or theft of money, property, data, or securities.

Protection Against Employer Liabilities

Worker's Compensation and Employer Liability Insurance are compulsory coverages in all states. The two work in concert to provide an umbrella of coverage protecting your business against liabilities arising from injuries or death of an employee.

Protection Against Personal Liabilities

In many cases, the liability coverage provided in your general, auto, and employer's liability policies may not be enough to protect your assets against a major catastrophic lawsuit. An excess liability or "umbrella" policy can be used to buy up limits of your other liability coverage. Umbrella coverage is relatively inexpensive relative to the liability protection it provides.

Business Auto Insurance

If your business owns or leases vehicles used in field, service, or delivery operations, it needs the protection of auto insurance customized for your specific requirements. Business auto insurance provides financial and legal assistance if an employee is found at fault in an accident that results in property damage or injury to another person, which a personal auto insurance policy would not cover.

Business insurance does more than provide peace of mind and protection from loss or liability. The right types of business insurance support an overall operating strategy that helps you stay competitive, if weather, unforeseen accidents or catastrophic events happen.

 

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