What is the first thing that comes to your mind when you think about business insurance?
For many small business owners, it may well be – ‘Later’.
But this particular word is the root cause of most problems. A survey reveals that about 75% of US businesses are 40% underinsured. While the main reason is concern about insurance costs, other factors, like a lack of awareness and knowledge of the right coverage also play a role. However, small businesses should not shy away from insurance, as it may endanger their survival.
For one, you do not have to spend a fortune to buy the insurance you need. Sometimes, customized packages can provide you with it all, that too at quite reasonable rates.
Then, consider the downside. Many businesses shut down due to a single claim or accident.
In a challenging market, such instances are becoming quite frequent. From automobile mishaps to worker’s compensation claims, even a small business has to keep mitigating financial risks constantly. A small accident on the business site, fire or theft, can be compensated with the help of insurance. So why take the risk of being without one?
Let us ponder the reasons why small business owners are reluctant to buy insurance but should not.
Costs of insurance
Most startup and small business owners are wary of additional investment. They feel that insurance is essential only for large enterprises that have to take care of a zillion things at once. They feel they can do without it. And such assumptions arise from insurance packages that try to sell more than what is necessary.
For example, if you do not need automobile insurance, why should you pay for one? Similarly, if you need only a few add-ons, like cybersecurity insurance, or business equipment coverage, why should you buy umbrella coverage? Customization is the key to your insurance issues here. You should look for insurance providers, who are ready to offer tailor-made packages according to your specific business requirements. It is then that the costs of insurance will seem lower than the financial risks.
Lack of awareness about insurance
Not all business owners are aware of the immense benefits of buying the right coverage for their businesses. They seem to think of insurance as an unnecessary expenditure that does not give immediate results. Well, it is not supposed to. Insurance is something that protects you from future threats. Accidents are one-in-a-million chance, but don’t you wear your seatbelts whenever you are in front of the wheel? Insurance is the seatbelt that protects your business from unfortunate accidents.
People are also unaware that they can lower the costs of insurance without compromising their needs. Business Owner’s Policies (or BOP) are quite cost-effective and tend to cover the basic threats that a small business may face. You may also carry a higher deductible to reduce the expenses further. Although it may increase your liabilities but still, it will protect your business to some extent. Some risk-management programs also help reduce premium costs, as those lower the threat perception.
Lack of knowledge of insurance
If you have or are planning to start a new business, knowledge of insurance is a must. You need to evaluate the potential risk areas of your business and get a thorough idea of the types of business insurance available before buying what is right for you. It will lower the chances of being overinsured, which can be expensive.
Your aim should be to get the maximum coverage at the minimum, affordable rates. And trust us, that is possible. Understand your specific requirements, know what you need to exclude from the coverage, or see if you need add-ons. Have a clear discussion with the insurance provider regarding these aspects. If they are ready to customize the insurance package, well, you know you are in good hands. But to make this insurance shopping endeavor a success, you need to know more about business insurance at large.
Not everything you believe is true
Several small business insurance myths end up increasing the number of underinsured businesses in the industry. Firstly, there is no one-size-fits-all solution when it comes to insurance. Each business faces different kinds of risks, so the insurance coverage should also be different and specific to the business. Secondly, the self-assurance myth that you can mitigate any risk from your pocket creates more harm than good. Insurance claims can add up and cut deep into your profit. So, insurance is the only practical way to deal with such unforeseen issues.
There are other myths too like, small businesses are naturally shielded from cybersecurity threats, business auto insurance is not necessary if you have a personal one, etc. Do not believe in these myths and talk to the professionals to get the right information.
The next time you hear the word, ‘insurance’, stop and think. Not whether you need it, but how much? This is a clever investment to be at peace. Although we hope you never get one, risks are always there. So be prepared!