Why Is Insurance Important for Small Businesses?


Insurance is one of the most reliable and powerful risk management tools for small businesses. There are hundreds if not thousands of different insurance companies in the world today hence no matter your specific insurance needs and preferences, you will find one that suits your needs best. Insurance policies not only benefits businesses but also individuals.

Let us proceed and look at how small businesses benefits from insurance policies

Give business managers a peace of mind: It is not possible to foresee the next accident. The thought of losing all the assets that you have worked hard for can be very traumatizing and may affect the performance of your business negatively.

Fortunately, there are different types of small business insurance that can help get rid of that fear and give you a peace of mind. For example a car insurance policy will cushion you from unexpected expenses that could arise from an accident or theft. It is recommendable to insure all your assets in order to avoid unnecessary expenses.

1. Build credibility

Clients are more attracted to businesses that care about their employees and customers. For example, there are a number of insurance policies that are specifically tailored for construction companies and individual contractors.

Studies show that contractors who have an insurance company that extends coverage to clients get more contracts than their counterparts. Hence, having insurance will go a long way in building your credibility and increase your competitiveness. 

2. Physical protection

Medical insurance policies cover business managers and employees from medical bills that could arise from accidents at their place of work.

Such policies help businesses to achieve their goals and objectives by saving them money that could have been spent clearing medical bills. However, it is important to include all employees in the policy in order to enjoy maximum coverage from it. Additionally, some insurance policies extend coverage to third parties involved in such an unfortunate occurrence.

3. Income protection:

It goes without saying that small businesses can incur huge losses as a result of destruction of their assets as a result of a fire accident or any other event.

Insurance companies understand this fact too well and that is why they have formulated insurance policies that compensate businesses for their losses. In most case, insurance companies will assess the level of damage caused by the accident in order to accurate calculate the losses.

Also, the business managers are actively involved in the evaluation process in a bid to foster transparency and avert disagreements later.

4. Help Business to Operate Global

Every small business seeks to increase its sales and expand its operations from just regional to a global level. Achieving this would greatly help them to compete with other large players in their niche whose businesses are already globally recognized.

However, expanding a business to a global level is not a walk in the park. One has to take strategic “baby steps” in order to make informed business decisions always. Regulatory bodies are very keen to ensure that all businesses that seek international licenses meet the set threshold.

This includes having insurance coverage from an accredited insurance company. Bottom line; insurance policies can significantly contribute positively to growth and expansion of a business. 

5. Lifestyle protection

This is closely related to income protection but quite different because it’s not directly related to the amount of profits attained at the end of a business’s financial year.

There exists a certain type of insurance that is designed to make sure that the lifestyle a given business entrepreneur or family is accustomed to continues even after a tragedy. Note that most small businesses are family owned hence any perturbations can affect all dimensions of the business negatively.

6. Time-saving and affordable protection

Professional liability insurance is a perfect example of a policy that offers time-saving and affordable protection to small businesses. Despite the fact that premiums attached to this policy as quite high, it can save you hundreds of dollars if you have to make a claim.

For example, security companies can be sued if they unknowingly install a security system that leads to client’s financial loss as a result of a security breach. A professional liability insurance policy will come in and pay all the legal fees and compensate the client on behalf of the company

7. Consumer warranties

This is another unique form of insurance that is offered by manufacturers and suppliers to customers after purchase of a product. Apart from attracting customers and building credibility of a business, this form of insurance helps to cushion clients from expenses may have being incurred if they had to repair the appliances on their own.

It is recommendable to read and comprehend the specific details of the warranty so as to file your claim correctly.

As you can see, insurance is a very important vice that all small businesses should embrace. However, due to the many options available, selecting the best insurance company can be a daunting task.

Below are some questions that you should ask an insurance company before signing the declaration document.

How long have you being operating?

Choose an insurance company that has being offering various insurance policies to clients. If possible, select an insurance service provider that who operates globally but with vast knowledge on the local business environment.

What are the benefits of taking up this insurance policy?

For example if you intend to invest in a property insurance policy, choose a company whose policy offers more benefits and privileges to the clients. Take time to keenly listen and assess the answers provided by the insurance company so as to make a wise decision.

Are the premiums affordable?

This is a personal question whose answer can only be arrived at after looking at the premium rates. The rule of the thumb is; choose an insurance company whose premiums are affordable.

Be sure to pay your premiums on time in order to avert penalties as a result of late payment of premiums.

Conclusion: Insurance can significantly help small businesses streamline their operations and elevate their sales to the next level of success.

About the author:  Fred Goodings is a small business owner from Melbourne, Australia.


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