Small businesses are unique in various ways. Risk-taking is inherent in entrepreneurship. But as they say, taking too many risks can be costly. Small business owners must be aware of the most common threats they could face and be better prepared for them. Investing your money in running a business can be critically risky for your business if you don’t pay the needed attention to insurance.
Small businesses may be more vulnerable and should, therefore, employ more comprehensive mitigation strategies. For a small business owner who wants to grow and expand the business, getting the business insured by a trusted insurance agency could well be crucial.
Small companies too face several risks that they need to get insured against, but surprisingly, there are certain risks that small business owners don’t always think of. Here are five risks that you should consider as the owner of a small business:
1) Liability risks: It is the nature of human endeavor that, despite all care, errors will occur and there will be consequences. There still isn’t a full-proof security net to prevent liability, but, there is insurance. Commercial General Liability (CGL) insurance provides coverage for all the damages the business might be found to be legally responsible for. This may include bodily injury or property damage to third parties. This includes accidental damage to a customer’s property. Having the right CGL insurance coverage can help to protect the business in multiple scenarios.
2) Business interruption risk: A business could be disrupted at any time due to factors beyond anyone’s control. A natural disaster could affect the area you operate in, making it difficult to get to the workplace. A power outage may cause extreme damage to some critical equipment. Any of these situations could interrupt operations for a day or two. Small business owners should prepare and practice business continuity plans. These plans, in times of crisis, help drive recovery. The plans should include a provision for Business Continuity Insurance. That insurance could provide some much-needed capital and the business continuity plans can help the business respond quickly.
3) Security risk: Cyber risk is, today, a real threat most small business owners have to face -even if they are not technology businesses. Businesses of all types risk financial loss, disruption, or damage to the business because of some sort of IT system failure. Your systems could be compromised, data held for cyber-ransom, and customer data leaked. Cybercriminals are targeting small businesses as they cannot afford proper security investments. Cybercrime presents a potent security risk for small businesses that must be effectively mitigated through security protocols and monitoring. The appropriate form of coverage, including, perhaps, an umbrella cover for new risks becomes essential. Buying a cyber risk and data breach insurance coverage can help too. Business owners need to formalize risk management policies and strengthen their prevention and response plans should something go awry.
4) Property risks: Many small businesses operate from an office, a storefront or a workshop. Certain risks could go undetected – an electrical outlet could cause an abrupt electrical fire that could damage the inventory, furniture, and other essential items. Repair expenses and replacement costs can pile up, leaving the business in stressful situations. If the business is operated from the business owner’s home, most home insurance policies do not cover business-related losses that may occur in a home office. Business insurance coverage that protects you against such unusual situations becomes essential for survival.
5) Financial risk: The most significant risk many small business owners face is a financial risk. Business owners often invest all their life savings or take substantial loans to get the business in motion. This creates a mountain of pressure to make the business a success. A regular income is necessary to maintain operations, pay employees, and invest for growth. Careful financial preparation and planning are essential to mitigate against this risk. In the context of financial risk, insurance must be a crucial factor in every business strategy to protect the business when disaster strikes.
If small business owners do not have the right insurance cover, it can prove fatal for the business. There are a variety of risk small businesses are subject to and an array of insurance policies, coverage, and terms to choose from. Talk to an insurance agency you trust to get a sense of the right package of insurance cover that is right for your business. It could be what helps your business ride out the next storm.