Every small business owner is fully aware that operating a company in this economic climate is risky. The best thing you can do, is to pass the financial risks onto another party. This is the purpose of insurance.
According to a recent survey, every year 35.2% of small business owners come across a situation that could lead to an insurance claim. Despite these statistics, a staggering 40% of businesses in the US are operating without insurance.
Why is this? The majority of small businesses in their initial years aim to remain operational at minimum cost. However, ditching insurance is not the best way to work cost-efficiently.
10 Leading causes of insurance claims
Every business, irrespective of its size, requires financial protection in the form of insurance. An insurance industry report has the following statistics for the past five years’ leading events for insurance claims. In order from highest to lowest:
- Burglary and theft —20%
- Water damage —15%
- Wind and hail damage —15%
- Customer slips and falls —10%
- Customer injury —Less than 5%
- Product liability —Less than 5%
- Struck by an object —Less than 5%
- Reputational damage —Less than 5%
- Onsite accidents —Less than 5%
So, what can you do to protect your commercial enterprise from these dangers?
Top reasons for getting commercial insurance for your small business
Commercial Business insurance is a bundled insurance cover that provides financial protection for your business premises and liabilities. You can also buy additional insurance covers to protect the general interests of your business.
Let’s discuss the 3 reasons to invest in Commercial Insurance for your Small Business
The law and business insurance
Until 1944, insurance was not mandatory for commercial activities, and there was no federal regulation to bind businesses to obtaining insurance. However, today most states in the US do not allow companies to operate without insurance coverage.
Businesses are bound by law to buy full or partial insurance. A business that fails to follow the state’s insurance requirements legally will be penalized.
Business insurance builds credibility
Would you trust a mechanic who brings the wrong tools to the job? In all likelihood, you would not let him touch your car.
The same goes for your business. A vast majority of B2B clients do not trust a company that compromises on insurance protocol. Furthermore, not having adequate insurance to protect your business shows a lack of professionalism and possible investment opportunities from new investors could pass you by.
Why would someone invest their money in your business if you cannot afford to buy protection for your business? Insurance builds your business’s credibility.
Your competitors are insured
Competitor analysis is one of the most critical steps in planning your business. Knowledge of your competitors helps you to plan short and long-term strategic goals. When faced with liability claims for any of the 10 leading causes we listed earlier in this article, your insured competitor will not damage their business to pay damages and fines. They will remain competitive. Can you say the same for a small business that has no (or inadequate) coverage?
Commercial insurance for your small business is an essential investment. In many states, you cannot operate without business insurance. In many industries, you won’t get the contract or job without liability insurance. A lack of insurance also affects the credibility of your business. Can any small business afford these disadvantages?