Small businesses are exposed to similar risks as big companies but are more vulnerable to failure without sufficient protection. With a business owner’s insurance, risks that could be detrimental to a small business can be minimized. Here are the most important reasons why a good insurance for a startup business is a necessity.
Protection Against Theft, Vandalism, and Natural Disasters
According to the U.S. Chamber of Commerce, about 56% of small retail firms in the U.S. have been victims of theft in 2021 alone. Not only that, about 50% of these businesses say that theft has only become worse during the past year. Sadly, not only are small businesses victims of theft by customers but also by employees. And the loss can be quite significant. According to a survey by Hayes International, retailers lost an average of $1,178.57 for every incident of theft in 2021.
Another key component that contributes to small business losses is vandalism. When products or facilities are vandalized, a small business loses the potential to turn a profit and has to spend for repairs or replacement of damaged facilities. And then there is the threat of natural disasters, which could potentially cause serious damage to a business’ structure, production processes, and customer servicing lines. Unfortunately, theft, vandalism, and natural disasters are unavoidable but with small business insurance coverage, the cost of loss, repairs, or replacements can be covered by the policy, potentially saving the business thousands of dollars in expenses.
Compliance With Requirement
There are different insurance coverage requirements for businesses as mandated by state and federal laws, and small businesses are required to comply with them. These are the minimum insurance coverage required by the law, which means there is a need to determine if the policy should suffice in case something happens or if an additional coverage is warranted. There are also certain types of insurance coverage that are required by banks and lenders in case a small business owner decides to take out a loan. Furthermore, some types of contracts with clients or suppliers may also demand insurance coverage for extra protection.
Coverage for Workers’ Compensation Claims
Workplace accidents are fairly common and serious accidents can require a high cost in terms of compensation to those affected. Workers’ compensation insurance for a small business will help cover for the expense associated with workers’ claims. A worker who suffers from an injury in the workplace will require time off work and medical treatment. In cases of severe injuries, the cost of medical treatment can be exorbitantly high.
Without small business insurance, the responsibility of paying for the expenses related to the injury/ies falls on the business owner’s shoulders. In other words, any cost due for the treatment of the worker’s injury will have to be paid out-of-pocket. In case the worker can no longer work as a result of the accident or will have to take a lengthy amount of time from work, all pay benefits (along with medical bills) will have to be paid for by the business owner as well, in the absence of an insurance policy. With a small business insurance in place, the business is protected, and any cost related to workers’ compensation claims will not be a burden to the business owner.
Provide Protection in Case of a Lawsuit or Third-Party Claims
A lawsuit is always a costly affair, something that all small businesses should be prepared for. A small business could easily suffer from serious losses in case it is sued or a claim is filed against it by a third party, such as a customer or a supplier. Even if the firm wins the case, it could still stand to lose a good amount of money due to the expenses associated with legal fees. Aside from the inconvenience that a lawsuit brings, it can also affect the reputation and image of the company.
A small business insurance coverage will ensure that the business is protected against the cost of the legal process. Whether this involves being sued by a client or employee or having problems with a contract, a small business will have a better chance of protecting itself if it has sufficient insurance coverage. Otherwise, it stands to lose a good amount of money that could seriously affect its finances.
Provide Protection to Employees
Some lawsuits are serious enough to cause a business to lose income. In fact, there have been lawsuits that led to the closure of a business. Compared to a large corporation, a small business has limited resources that may not be enough to provide it with the protection it needs should problems arise.
A sufficient insurance coverage in place is assurance for employees that the venture is protected in case something goes wrong. Employees are also assured that there is a low likelihood of a closure or retrenchment that could lead to job losses. A protected business, regardless of its size, will be regarded as stable and reliable by its employees and when there is assurance that they can keep their jobs, they are more likely to stay. Furthermore, this can also help attract new talent, allowing even startup businesses to expand and grow.