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Purpose of Insurance: 5 Key Reasons to Have Business Insurance

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purpose of business insurance

Business insurance does more than just build credibility. Keep reading for insurance: 5 key reasons to have business insurance.

Did you know that litigation costs small businesses more than $100 billion annually in the U.S.?

Or that over one-third to one-half of the nation’s small businesses are in litigation in any given year?

That’s right!

With all these risks, it’s no wonder only one-third of all U.S. establishments get to see their 10th year in business.

The good news is many of these perils are preventable with business insurance. After all, the purpose of insurance for business is to protect your assets from such threats. Business owners consider highly rated business insurance as a wise investment.

You can obtain business or commercial insurance, combining comprehensive coverage. For instance, you can include public liability insurance to cover medical expenses if someone sustains an injury because of your business. This also covers property damage.

Other add-ons to business insurance include employers’ liability insurance and professional indemnity insurance.

We’ll take a closer look at why every business needs insurance in this post, so be sure to keep reading!

1. The Primary Purpose of Insurance: It’s the Law

Some types of insurance for businesses, particularly worker’s compensation, are federal requirements. Failure to purchase this mandatory insurance can result in companies facing severe fines. They can even get sued and receive criminal charges.

The federal government also requires unemployment insurance and disability coverage.

However, laws vary from state to state based on the work’s size, structure, and nature. Most states require these coverages so long as a business has one employee. Others, like Arkansas, require worker’s comp for companies with three or more employees.

2. It Can Protect You from Lawsuits

A staggering $20 billion a year – that’s how much U.S. corporations spend on litigation lawyers alone. This further proves how prone to lawsuits U.S. businesses are.

With liability insurance, you can avoid getting sued (and the expenses that come with it). This protects your business against lawsuits claiming bodily and personal injury to others. It also covers medical costs and property damage claims against your business.

This makes it one type of business insurance you shouldn’t go without. Business owners can consult a personal injury lawyer to better understand the legal aspects of business lawsuits. If a customer files a complaint for a product defect, slip, or fall, a personal injury lawyer can help negotiate a settlement, especially if you lack business insurance coverage.

3. It Safeguards Your Valuable Property

Another reason you need business insurance is for property and asset protection. Property insurance covers property loss or damage due to events like fire and storms. The best business insurance can also protect your assets from property crime.

4. It Can Help You Recoup Loss of Income in Case of Disasters

Business disasters can be man-made or natural. Man-made ones include vandalism and arson. Earthquakes, wildfires, landslides, floods, and other natural disasters cause detrimental effects on businesses. A power outage can cause product deterioration, food spoilage, and customer inconvenience, even if you have high-powered generators. Therefore, businesses must have contingency measures, including obtaining comprehensive insurance coverage.

Business Owners Insurance (or Business Owners Policy) protects against loss of income. This kicks in if a business suffers from a considerable loss, say a fire or theft, that renders it nonoperational. Since the temporary closure means a loss of profits, the BOP will cover those losses.

Small business owners should consider getting business interruption insurance. This covers lost business income due to a forced shutdown following a natural disaster, keeping your company thriving after you reopen. Research online, comparing different business insurance plans from other providers.

5. It’s Essential for Attracting Talents and Retaining Them

92% of employees say employee benefits are crucial to job satisfaction. Almost one-third of employees will look for another company if too few benefits exist.

This already tells you that business insurance affects employee acquisition and retention. You’ll have difficulty getting top talents if you don’t carry the proper insurance coverage. At the same time, you may lose your valuable skills to other employers.

Business insurance can provide some of these benefits that employees look for. For instance, you can get a more robust policy instead of carrying just the minimum worker’s comp. You can upgrade it with additional disability insurance and medical coverage.

Protect Your Business and Assets with the Best Insurance Policy Now

There you have it – your ultimate guide on the purpose of insurance and why your business needs it. Without it, your organization is at risk of being against federal and state laws. If disaster strikes and you lack insurance, you may close shop.

So, as early as now, start comparing your business insurance options! The sooner you get a robust insurance policy, the sooner you’ll feel at ease knowing your assets are safe.

Want to stay in the loop of the latest in business know-how? Then, bookmark our site to keep returning for more guides like this! For example: What is shaping the insurance industry?. There are 10 top trends.