Businesses require certain insurance policies, while others are optional. For example, businesses that employ workers are required to have a workers’ compensation policy, whereas professional liability or general business liability policies may only be necessary for companies in particular industries. Even when not required, there are advantages and disadvantages to having insurance. Mark Vanzo from Smart Business Insurance has explained some of these below:
Advantages To insure New Business
Provides Coverage for Business Property
The majority of businesses have business inventory and property. In case of a robbery, fire, or another kind of disaster that leads to loss or damage of business assets, the business could be covered by a general liability policy to the policy limits.
Safeguards Against Liabilities
There are many reasons businesses are sued. Among the advantages of ensuring your new business is protecting it against different types of lawsuits. Many insurance policies provide compensation not only as a settlement to the injured party but cover legal fees when the company is battling a lawsuit as well.
Insurance provides coverage for loss of business as well. There could be times when the operations of a business have to cease due to a disaster like a fire, break-in, or flood. There are some business insurance policies that cover revenues according to historical information. Therefore, if you average $15,000 monthly in revenues, the policy pays the amount up to the policy limits throughout the time the business has to close.
Disadvantages To insure New Business
Additionally, it safeguards the building leased by the business for its operations. If a vandal breaks a storefront window, the policy could cover the glass. To ensure adequate coverage, a thorough inventory of assets should be done by business owners, which should include furniture, computers, inventory, and supplies.
Pays Slowly or Denies Claims
A number of insurance limitations are there for business owners to think about. Business insurance can be confusing with a lot of different types of policies and as such, a claim might arise that is not covered by a particular policy. In addition, there are many claims that take a while to process as insurance companies must assess the damage and establish a correct accounting of the loss. The energy and time required can be challenging and could even end up being unfavorable for the business.
Business owners should use the service of a professional business insurance agent who is well versed in the requirements of the business industry. This professional will develop an insurance portfolio to satisfy the budget limits and specific needs of a company. For instance, if the property limits of the policy are $30,000 but the business needs $40,000 to restore everything, the property is underinsured, and this would be responsible for that gap.
Adds an Expense
Insurance can be costly, particularly in certain industries where injuries often occur. For example, construction business policies are more costly than policies for accounting organizations. As a business expands, its policies should be reviewed to ensure existing needs are covered. Otherwise, a policy might not completely cover a loss, which would leave the business underinsured.
Types of Insurance to Consider for a New Business
This type of insurance provides coverage for employees against illness or injury at work and it is required by law for any company that has employees. This will provide coverage for disability, medical treatment and death benefits if a worker is injured or dies due to work performed with that business.
Business Liability Insurance
This safeguards the company should a customer falls or otherwise sustains injury on the property where the business is located.
Professional Liability Insurance
Medical malpractice and other types of professional liability insurance protects professionals against mistakes that could lead to causing harm to a patient or client. No one-size-fits-all policy is there for professional liability insurance. Every industry has its own unique set of concerns which will be tackled in a customized policy devised for a business.
Whether a business leases or owns the location where it operates, property insurance is vital. This type of insurance provides coverage for equipment, furniture, inventory and signage in the event of a theft, storm or fire.
By getting the right insurance, a business can avoid major financial losses caused by a catastrophic event or lawsuit.