It’s easy to get swept away by optimism when trying to launch or run a business operation.
Most inexperienced entrepreneurs make the mistake of assuming the best-case scenario as the only way things could play out.
This means when things do go wrong as they almost always do, they are caught unprepared and vulnerable. A lot of new businesses simply fail because the key decision makers ignore the risk factors and underplay the importance of business insurance.
To save a few hundred bucks every month, business owners put their entire investments at risk.
How much does business insurance cost? For a small business with limited assets, insurance premiums are well within the realm of affordability.
For reference, an average small business (local retailer) a standard BOP (Business Owners Policy) costs around $1000 a year.
This usually includes liability cover, property damage protection, and business interruption coverage. While we wish your entrepreneurial future is all sunshine and rainbows, in this post we will help you prepare for the worst.
If you store any kind of client, customer, or business data you are at risk of data breaches. A business that accepts credit card payments also needs to strengthen its security technologies to protect customer banking information. However, security technologies can never guarantee protection against hackers.
That’s mainly because criminals use ingenious new ways in order to fool these security systems. This is why cyber insurance coverage makes sense to protect businesses if things do go wrong.
The coverage amount helps businesses pay out fees, fines, and damages if data breaches affect their customers and clients.
Office and Property Damage
No office building is impervious to natural disasters. Everything from earthquakes and floods to fires and hurricanes can cause severe damage to business properties.
If you are not covered this expense can lead towards bankruptcy. As mentioned before, most standard BOPs come with property cover.
However, it’s important to read the fine prints to verify if your BOP protects your assets from all types of natural disasters. Some business insurance policies sneakily leave out certain disasters such as floods.
Customers sue companies for all sorts of reasons. Some of them are frivolous, like the one time a guy named Richard Overton sued a beer company for misleading him into believing that his life would transform and become like the one shown on the beer commercial.
Thankfully, his insane lawsuit was dismissed by the court.
However, a lot of times businesses end up losing customer lawsuits. This often happens if their products and services indirectly or directly end up causing harm.
To protect themselves from all these instances, businesses rely on solid liability coverages. For a small business, a standard BOP is enough as it includes liability protection.
However, if you are into making food or any other product that can be considered high-risk, getting a supplementary liability policy is a smart move.
Failure of Critical Machinery
Sometimes the operation of a business relies solely on the health of a single expensive equipment. In all those cases, getting a separate business equipment cover is highly recommended.
Make sure the total coverage amount is enough to replace the faulty machine with a new one if the damage is irreparable.
The halt in business operation can be devastating. Paying utility bills, employee salary, and rent can be too much to bare when you are not making any money.
This is where business interruption insurance comes into play. If you are covered, the insurance covers your monthly income, pays for renting a temporary office, covers utility bills, and more.
Workplace Injury or Death
Getting a workers’ compensation insurance is a legal mandate if you have employees.
These policies allow businesses to pay compensations to employees if they get injured or worse during office hours. These also help settle compensation claims after layoffs.