Most business owners are very diligent in consistently reviewing their budgets, cash flow activities, supply chain resources, employee efficiencies, and costs as well as other activities that affect their ability to make a profit. Their ability to stay in business depends on the “bottom line.” When times get tight, one of the first items they feel they can reduce or even cut can be their insurance. This can be a fatal decision-one that a business owner could regret forever. As a business owner, consultant, and mentor, I pass on this bit of wisdom. A business owner’s three best friends are their attorney, accountant, and insurance agent.
Let’s briefly examine a few areas regarding insurance for your business, growth, and survival. So, with the assistance of 40 years of business experience, what does business insurance protect you against, and why do you need it?
"Business insurance could protect small businesses from situations that may result in losses. Type of business insurance includes protection for property damage, employee-based risks, and legal liability."
Pennsylvania requires, if you have employees, to carry worker’s comp insurance to cover expenses incurred should an employee suffer injury or become ill while directly working for an employer. Pennsylvania also requires businesses to maintain proper vehicle liability insurance or financial responsibility coverage. Rule of wisdom: ALWAYS carry enough relevance to the business’s exposure. Minimum is never enough!
General liability insurance policies, in most cases, cover you and your company for claims involving bodily injuries and property damage resulting from your products, services, or operations. It may also cover you if you are held liable for damages to property you are renting or leasing.
Professional liability insurance helps if you make a mistake in any of your professional services. It helps prevent liabilities from occurring.
Subset: Cyber liability, covering data breaches and related issues, may not necessarily be included in core policies. So, you should investigate carrying such.
This can be the coverage of an additional event to your business liability insurance, such as medical expenses, attorney fees, and damages when your company faces a lawsuit.
This coverage insurance is essential for small businesses. It helps to protect the owned, rented, or leased building your business occupies. Additionally, it can protect against loss of use of the equipment you use to run your company.
Product liability insurance helps to protect businesses from repercussions that arise if a product causes injury or other damage to third parties. This also includes protecting the consumers if harmed by how a product is manufactured, designed, marketed, or misused.
Business interruption insurance would cover your business in case of events that lead to losses, such as fire or natural disasters. This insurance replaces your income if any unexpected or damaging event happens.
One of today’s most important protections, whether a mom-n-pop or a mighty corporation is cybersecurity insurance. Cyber insurance generally covers your business from a data breach involving sensitive customer information of all types.
Business property insurance is coverage that can protect your company's physical assets from unexpected events, including fires, windstorms, theft, and vandalism.
Additionally, the primary purpose of property insurance for a small business is to provide critical financial assistance in the event of a loss. This should allow the enterprise to continue to operate with as little disruption as possible.
A typical homeowner’s policy may not provide enough coverage or cover areas of activities segregated from “normal” household activities. Most homeowners’ policies specifically exclude business liabilities for a variety of reasons.
Not one person wants to consider the inevitability of loss of life before planning for such. Yet business owners are notorious for not including this as a priority item, a cost of doing business. Owners should evaluate the current net worth of their business and have that worth covered. Additionally, a good formula for operations is to equate six (6) months of operations costs within the coverage. Why would you work so hard to only lose it all in a moment-in-time event?
As in life, so business, plan well, plan smart!
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The Duquesne University Small Business Development Center (SBDC) offers no-cost, confidential consulting services and educational programs in Southwestern Pennsylvania to empower entrepreneurs and small business owners with the knowledge they need to start, grow, and prosper.