Why do Other Businesses Buy Insurance?
Every business is unique. Your risk profile will differ from that of business next door to you thus, factors that will influence your insurance needs will vary by industry, location, size, and type of operation, among others. A few of the reasons fall within these categories:
Regulatory Compliance
Every industry has its own unique set of compliance and regulatory requirements. For many industries, having insurance protection is one of them, however, it is important to investigate and ensure that your business entity is complying with the specific requirements applicable.
Due Diligence & Duty of Care
In general, business owners and corporate leaders buy insurance to perform their due diligence and to satisfy their duty of care to their stakeholders and shareholders.
Protection of Capital & Assets
Quite often the primary reason most businesses buy insurance is to protect their business assets, revenue, capital, — inclusive of human, financial, physical, or other forms of business capital — and liability in the event of an unforeseen loss or damage that can disrupt the business operation, present undue financial burden, or cause the business to fail and shut down.
The Benefits of Purchasing Insurance
Insurance enables businesses to recover from accidental losses with the financial reimbursement that is paid by the insurance companies to the insured.
Let's look at a micro risk loss scenario like a fire at your business location, and you are temporarily unable to operate. Depending on the magnitude of the fire, the list of losses and fiscal responsibility can be astronomical.
I. You may lose your physical assets, the building, equipment, and contents.
II. There may be injuries to employees, customers, or others present.
III. Your property owner will be looking for you to repair damages to the property.
IV. Neighboring tenants that have been affected by the fire will be looking for you to pay for the damages caused to their property.
V. Other costs could include- Lawsuits from third parties- Costs to remove the debris and clean up.
VI. During this time, your business is not operating so you may be losing potential income.
- If you are a supplier to other businesses, they will be affected.
- Your clients may find alternatives while your operations are down.
- If you can operate elsewhere in the interim, can you finance that extra expense?
Insurance can help take care of these and other unexpected financial burdens.
The question is, did you insure your risks properly and do have the right insurance that will respond when you need it most?
Many businesses can recover quickly from unfortunate events like this example and are able to get back to operating as usual with little disruption to their business because of the insurance payments.
Certain disasters are catastrophic in nature that without the help of insurance, proper risk management, or business continuity program in place, a significant number of businesses are not able to recover and fail as a result.
10 Reasons Why You Should Buy Insurance for Your Business
In addition to the example provide above, you will need to buy insurance for your business if the following apply to your business:
- You hire employees for your business of operation. State laws requires you to have workers’ compensation and unemployment insurance for your employees. You may also want to provide life and health insurance benefits to your employees as part of your duty of care or to attract top talents to your business.
- You have substantial assets in the form of building, contents, inventory, and heavy or light equipment that if damaged can significantly impact the business operation.
- Your business entails providing advice to others where any errors or omissions could result in a significant financial loss.
- Your business entails producing products or providing services where mistakes or defects can cause harm, injury, death, or significant financial loss to others.
- Your business has automobiles and drivers that operate the vehicles for business purposes.
- You or your business can be sued by customers, employees, or other third parties for events that occur during your business operation.
- Your business is located in an area where natural disasters, such as hurricanes, tornadoes, flooding, earthquake are possible or are frequent occurrences.
- Your customers/clients or third parties come to your place of business, and you are responsible for their safety and wellbeing while they are in your place of business.
- Your business involves a potentially elevated level of risks of accidents and injuries.
- You want to protect your business income and profits, and you want to recover quickly when disaster strikes.
Disasters and Accidents do Happen.
Disasters and accidents do happen, not having insurance to recover from them should not be one of the reasons your business stops operating.
Business leaders and small business owners are aware that resources are limited. Therefore, protecting those resources is essential to the continued success of the business operation in the face of ever-changing market conditions, unpredictable weather, environmental, and supply chain risks, and inherent operational hazards and threats.
At Axios Risk Solutions, LLC., we help small and medium-sized enterprises minimize and manage their business risks through tailored risk management strategies and protect their business through a variety of insurance solutions in the market. To request a quote or speak to a broker, contact us here.
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Author: Sandra Owusu-Fianko
Sandra Owusu-Fianko, is the Principal and Risk Advisor at Axios Risk Solutions, LLC. She has an extensive experience in the insurance industry and a MS degree in Enterprise Risk Management. She is passionate about finding appropriate risk management and insurance solutions for her clients.
