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Posted on 2014-06-17
As a small business owner you face plenty of risks. If you’re being smart about it, you’re probably devoting a portion of your business strategy to risk management: ensuring enough cash flow reserves, managing overheads, avoiding unnecessary debt, diversifying your client base and the like.
Business insurance is another way of covering other types of risk, and in evaluating if you need it, you should first look at where your business is vulnerable. You don’t want to over-insure; at the same time you don’t want to overlook an area of risk that can easily be addressed.
Here are a few areas to evaluate when deciding on your business insurance needs…
Where is your business risk?
Your business risk profile will vary according to the kind of industry you are in and what you do within that industry. Identifying where you are at risk involves looking at all your obvious business activities and the assets associated with them, and evaluating what you could lose.
That’s the first step. After this you should look for the less obvious ways in which you are at risk. You could get sued, or become personally liable for debt. These may not seem as likely to happen as having stock stolen, but they can bring your business down just as easily.
Effectively this means dividing your company risk profile into your business assets and your business operations. Perhaps the best way to evaluate where your risks are, is to look at the different types of business insurance available.
Insurance against physical risks
Physical risks are probably the easiest ones to identify and quantify. Typically they involve the loss of the different types of assets your business has. This can be anything from buildings to equipment to stock.
What you’re looking at here is basically property insurance. You’ll want to insure against things like fire, theft, water damage – much the same as household insurance. You’ll also want to take out insurance on any vehicles that your company owns and operates.
General liability insurance
Less easily quantifiable are the different ways in which your business operations may open you to liability.
You can divide this liability into 3 broad areas: something happening to your employees, something happening to visitors to your premises, and liability caused by customers who have used your products or services.
Various insurance products are available to cover these areas.
Professional liability insurance
In addition to general liability for all types of businesses, there are specific types of insurance for medical care providers, accountants and other professionals whose line of work leaves them open to being sued for damages that a client may incur. If this is your line of work, you need to look at those insurance products.
Directors liability insurance
While company legislation provides a certain amount of protection against being held liability for company debts, your personal assets can nonetheless be attached under certain circumstances.
Fortunately you can take out insurance against this risk as well. There are plenty of products available that can help to prevent personal loss resulting from unforeseen business catastrophe.