Why Do Businesses Need Business Insurance?
If you’re asking yourself, “why do businesses need insurance?” The answer is: because accidents can happen at any time. And when they do, business insurancehelps pay for damages you’d otherwise have to cover out-of-pocket.
There are plenty of reasons you need business insurance coverage for your company. Having it helps:
- Save you time, money and stress
- Protect your business from damages
- Provide benefits to your employees
What insurance does your business need?To make sure you’re protected, consider these business insurance coverages:
- Commercial property insurance
- General liability insurance
- Business income insurance
- Data breach insurance
- Workers' compensation insurance
The top 10 reasons for insurance coverage are:
1. Business Insurance Is Required By Law
Most states require small business insurance. However, even if yours doesn’t, you should still consider it.Business insurance benefits could protect you from financial loss. Without it, your business may face risks if:
- A customer sues you after getting hurt at your place of business.
- A fire destroys your building or inventory.
- A computer with your clients’ personal information on it is stolen.
2. Business Insurance Protects Your Employees
One business insurance coverage that most states require is workers' compensation insurance.* If your employees suffer work-related injuries or illnesses, it provides benefits like:
- Medical care
- Missed wages
- Funeral benefits
It’s important to know that workers’ compensation offers different protection than unemployment insurance programs.1
3. Business Insurance Protects Your Customers
Your business insurance can also help cover your customers if you have a Business Owner’s Policy (BOP). These BOP policies combine business property and business liability coverage into one to help protect your business from:
- Property damage
- Personal and advertising injury
- Bodily injury
- Product liability
For instance, if one of your customers slips, breaks their leg and needs to go to the hospital, your BOP can help pay for their medical costs.
There is also data breach insurance to help protect your business and customers if a security breach occurs. Foronline businesses, insurance can help pay for:
- Identity protection solutions
- Public relations
- Legal fees
- Liability
4. Business Insurance Builds Credibility
Your business insurance does more than protect your business. Having the right policies shows your customers and contractors that you take managing risk seriously. It also helps communicate to everyone that you’ll provide the right protection, no matter what accident occurs.
5. Contracts May Require Business Insurance
Businesses like yours make contracts all the time. So, it’s important to be aware that many contracts require insurance protection. Some examples include:
- Renting a building from your landlord
- Borrowing money to finance goods
- Loan agreements
- Clients agreements
6. Business Insurance Can Help Recruit and Retain Employees
Employees look for more than just a salary as they search for jobs. They’re also looking for the right benefits, like life and health insurance. Businesses without insurance often miss out on attracting and retaining the best employees.
7. Business Insurance Protects Management
Your management liability insurance can help cover the owner, CEO or “key person” that runs your business from costly lawsuits. Management liability insurance can help protect those working for nonprofit organizations and publically traded companies. In most cases, you can add this type of insurance to your BOP policy.
8. Business Insurance Protects Against Natural Disasters
Most states suffer from various natural disasters, like:
- Flooding
- Fires
- Tornados
- Hurricanes
- Lightning
This insurance is important for protecting your business’ assets and the possessions inside it if a disaster strikes. You can also learn about our flood insurance to help protect your business from floodwater damage.
9. Business Insurance Helps with Lawsuits
Every company can get sued and face legal fees. One of the reasons you need business insurance is to help cover the costs. For example, if you have an injured employee that sues you, your workers’ compensation insurance can help pay the legal fees. And, if that injured worker ends up with a disability, workers’ compensation can act as disability insurance and provide them with benefits.
10. Business Insurance Offers Peace of Mind
One question we’re often asked is, “Why do I need business insurance?” Our specialists can help answer this every day. They can guide you through each of our insurance coverages and decide which property and casualty insurance policies fit your needs.
We love serving small businesses, and we’re here to help any way we can. You can learn more abouthow to get business insurance by calling us at 855-829-1683 today.
Last Updated: July 13, 2022
1 U.S. Department of Labor, “Unemployment Insurance”
As an insurance expert with extensive knowledge in the field, I can confidently affirm the critical importance of business insurance for companies of all sizes. The provided article touches upon several key concepts related to business insurance, and I'll delve into each of them to demonstrate my expertise.
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Legal Requirement for Business Insurance: The article rightly highlights that business insurance is often required by law in many states. This requirement is not arbitrary; it serves to protect businesses from financial loss in the face of unforeseen events. Even in states where it's not mandatory, the article wisely suggests that businesses should still consider it. My expertise corroborates this, emphasizing that compliance with legal requirements is a foundational aspect of risk management.
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Workers' Compensation Insurance: The article correctly identifies workers' compensation insurance as a crucial coverage, mandated by most states. It outlines the benefits it provides to employees in the event of work-related injuries or illnesses, such as medical care, missed wages, and funeral benefits. My expertise extends to understanding the nuances of workers' compensation, distinguishing it from unemployment insurance programs.
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Customer and Business Protection: The article introduces the concept of a Business Owner’s Policy (BOP) and how it can protect both customers and the business. This involves coverage for property damage, personal and advertising injury, bodily injury, and product liability. Additionally, it mentions data breach insurance for online businesses, emphasizing the broader scope of protection offered in the digital age.
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Credibility and Risk Management: The article rightly emphasizes that having the right insurance policies builds credibility. It communicates to customers and contractors that the business takes risk management seriously. As an expert, I reinforce that insurance is not just a financial safeguard but a strategic tool in establishing and maintaining business credibility.
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Contractual Obligations: The article correctly points out that many contracts, including those related to renting, borrowing, and client agreements, may require insurance protection. This aligns with my understanding that insurance is often a contractual obligation to mitigate potential risks associated with various business activities.
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Employee Recruitment and Retention: The article insightfully notes that offering insurance benefits, such as life and health insurance, can attract and retain high-quality employees. My expertise in the field emphasizes that competitive employee benefits are a crucial aspect of talent acquisition and retention.
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Management Liability Insurance: The article introduces management liability insurance, highlighting its role in covering key individuals within a business from lawsuits. This aligns with my knowledge that such coverage is essential for protecting owners, CEOs, and key personnel from legal liabilities.
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Protection Against Natural Disasters: The article rightly underscores the importance of insurance in protecting against natural disasters, listing various types such as flooding, fires, tornados, hurricanes, and lightning. As an expert, I understand the geographical considerations and specific insurance needs associated with different natural disasters.
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Legal Protection and Lawsuits: The article correctly emphasizes that legal fees can be a significant cost for businesses facing lawsuits, and having insurance helps cover these costs. I would further add that insurance plays a pivotal role in mitigating the financial impact of legal disputes.
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Peace of Mind: The article concludes by stating that business insurance offers peace of mind, a sentiment I fully endorse. Insurance is not just a financial tool but a psychological reassurance for business owners, knowing that they are protected against a range of potential risks.
In summary, the concepts covered in the article align with my comprehensive understanding of business insurance, and I am well-equipped to provide guidance on selecting appropriate coverage tailored to specific business needs.
