Why Small Business Owners Should Be Comprehensively Insured

The small business community is experiencing unexpected growth, not just in the United States but globally. The rise of social media, acceptance of independent brands, and more such factors deserve at least some of the credit for this growth, even in uncertain times. 

When referring specifically to the US, the small business community greatly contributes to the nation’s economy. With 33.2 million small businesses, this sector has a 99.9% market share of all US businesses. As a result of these small businesses, which employ anywhere from 1 to 499 people on average, a sizable employment pool is created and served. 

However, the community faces more difficulties than typical business models. The small business community in the US frequently faces a variety of issues because they lack resources at their disposal. These include problems with the supply chain, operational shortfalls (which drive up the cost of commodities), talent shortages, inflation issues, and more.

All of these problems make it difficult for small businesses to survive the heat. Many small businesses register each year, but how many make it to high tide? According to a study, 18% of businesses close in the first year of operation, and about 50% do so within the first five years. While many causes are unfixable, some problems can be dealt with by adequately protecting the company against temporary shortcomings.

Reasons Why Small Business Owners Need Protection

Cyberattacks, Phishing, and Hacking

While businesses across the globe are expanding because of the digital upturn, cyberattacks have been continuously troubling business owners left and right. According to studies, in 2021, over 45% of small business owners reported a data breach and a loss in revenue. In fact, 40% of businesses didn’t exhibit an understanding of how and why cyberattacks occurred in their organizations. 

Usually, larger teams with tight-knit digital infrastructures tend to have fewer issues against such attacks because they have more seasoned and technically adept people in place to ward off cyber threats.

For small businesses, however, the best way to avoid lawsuits, pay for legal expenses, and sustain reputation is to purchase cyber insurance. It’s an excellent way to mitigate the effects of cyberattacks.

Natural Calamities Resulting in Damage

As per a 2022 report, 16% of businesses reported losses of more than $100,000, while 53% reported losses of less than $25,000 because of natural disasters in the US.

Natural disasters cause business interruptions, which affect small businesses more than well-established companies. A business’s ability to survive such high losses depends on its cash flow, valuations, and outside support. Many small businesses can go out of business entirely if they experience significant losses and don’t receive assistance from outside sources. 

A great way to stay safe is to select specialized insurance that covers the damage brought on by disasters in your area. So even if you have other protective benefits, getting flood insurance, for instance, is important if you live where it is common to face hurricanes or floods. These types of policies can assist in moving to a temporary location and restoring the business with the help of compensation money and other assistance.

Business Interruption, Temporary or Permanent

It can be challenging for small business owners to face a temporary or permanent shutdown because of hand-to-mouth conditions, especially in the first few months of operations. Liabilities such as worker compensation, general expenses, etc., may exist for many small businesses. If operations cease and there’s little to no backup capital, it becomes challenging to pay for all these liabilities.

To prevent such scenarios, obtaining business interruption insurance is a good place to start. This can assist in covering any liabilities or debts up until business operations are resumed. In addition, purchasing workers’ compensation insurance is a fantastic way to safeguard small businesses.

Another reason for businesses to insure themselves is general liability. These can include mishaps on the road or at work, ineffective/bad services or products that result in lawsuits, or any other error that is unavoidable.

Besides, employment practice liability insurance can be a great way to handle legal cases or provide compensation if your employee sues you for unfair employment practices or other wrongdoing. A smart way to ensure that you are fully covered in all respects is to invest in a variety of insurance policies.

Certain Risks Small Businesses Overlook

There are additional risks that small businesses face but frequently ignore, apart from the ones mentioned above. 

Warlike Situations and Attacks

Warlike situations, mob attacks, and terror attacks are examples of situations that are frequently overlooked due to their rarity. These attacks, however, must not be overlooked entirely. Such attacks are frequently covered by most of the general protection policies available to small business owners, but it is advisable to double-check the basics.

Intentional Harm Done by Others

Employees, partners, clients, competitors, and others may try to pose intentional harm, which can be devastating to your small business. As a result, it is critical to invest in liability insurance and navigate such touch points that can harm the business.

To mitigate such risks, over 27% of businesses choose insurance as their first and foremost step toward a better financial state. 

Get in touch if you are a small business owner considering insurance protection or reevaluating your policy. We offer thorough risk assessment and portfolio analysis, taking into account your business model and any potential areas where protection may be required.