Around 1 in 3 small businesses reportedly didn’t have insurance last year. Yet, at the same period, 3 out of 4 business owners reported suffering from an insurable event. Why do so many small businesses take the risk to remain uninsured? Especially since accidents, theft, and other such events can cost businesses tens of thousands of dollars. Is there a hidden reason or an underlying benefit to remaining uninsured that is driving this behavior?
Reasons Behind Being Uninsured
Sadly, the answer is no – there’s no surprise benefit. It’s not even steely confidence that’s influencing these decisions. Rather, it’s ignorance. Most small business owners seem to be unaware of the different kinds of insurance policies out there. They’re also unaware of how different policies can be applied to different situations. In our career, we’ve seen many business owners beam with a pleasant surprise when we inform them of the intent and features of a specific type of policy.
Many are also unaware of how much cover they must take. They end up being uninsured as they don’t have access to accurate information about the potential risks and liabilities. They are also perturbed by the costs of insurance, unsure of what coverage they need, and don’t think they need to have insurance in the first place. What they don’t realize is that the cost of being uninsured is far higher than any of the premiums that they’d have to pay.
Risks of Being Uninsured or Under-Insured
- Financial risks: Fires, flooding, hurricanes, storms, and other disasters can be very expensive. If you don’t have the right insurance policy to cover your damages, you could face devastating losses. That can be difficult for businesses to recover from.
- Legal issues: If you have customers or clients, or even your employees falling at your premises and injuring themselves, you’d be liable to pay for their medical bills and even pay them wages while they’re out of action. Failure to do so could result in these individuals taking action against you. These kinds of lawsuits are financially draining and difficult. They can also damage your reputation if they become large-scale issues.
- Non-compliance: Certain laws at the local, state, and federal levels make it necessary for businesses to have insurance coverage for many risks. If you don’t, you may be penalized and you might have to pay high fines. Even worse, you may have your license revoked.
- Damage to reputation: Small businesses can have their reputations damaged if customers experience issues such as cyber-attacks or other problems that could possibly be traced back to the goods or services you provided them. Many problems could lead to customers making a PR nightmare for you. If you don’t have the right coverage, it can be very costly.
- Loss of business: Horrible events could damage your property and equipment. That would directly affect your business’s productivity. This would decrease your profits and recovering from this would be very difficult. Such a situation could be extremely detrimental to small businesses and push you into bankruptcy.
What Can You Do?
You can prevent these business risks by being prepared. Purchase the right insurance coverage for your small business. Prepare to discuss all the necessary aspects of your business with your insurance provider. That’s where a good insurance advisor can contribute. They would listen to the concerns of the small business owner and give them the right guidance. That would help them move up the decision-making process in a more informed manner. The right insurance provider has the following qualities:
- They understand your needs: As each business has its unique set of issues, risks, requirements, etc., it’s important to talk to an empathetic and understanding insurance agent. There are several commercial options so they would have to clearly explain each to you and help you pick the right one. You must also understand the level of risk in each policy before choosing the right coverage.
- Protect home-based small-scale businesses: Did you know that a typical homeowner’s policy doesn’t protect a home-based business venture? If your set-up is out of your home, you need to put a rider to your policy that would cover your home-based business.
- Has your best interest in mind: The right provider would see you as more than just a customer. They would genuinely want to help you protect your business. But to do that, you need to find an experienced professional who is familiar with your business and industry. Otherwise, you can find someone who is dedicated enough to do thorough research and then come to you with options.
- Review and update your policy annually: You must also find a provider who is flexible and can change your plans as your business changes and grows. You’ll have to review the policy now and then, as well as the coverage and any changes for the new year.
By following the above advice, small business owners will find it easy to find the right policies for themselves. They’ll be able to choose the right coverage, too. Don’t let ignorance stop you from doing what’s best for your company!