Business Insurance – How It Can Help In The Time of Disaster
If the pandemic has taught us anything, it’s to always be prepared for the worst. Yelp data shows that over 163,735 businesses have closed since the pandemic began, with around 60% indicating that they will no longer reopen. This has caused a drastic change in several industries.
In fact, CNN’s article on disease outbreak business insurance reports that there’s been a surge in interest from companies on an insurance plan that covers pandemics. If disaster does strike again, it’s safe to say that more businesses will be better prepared.
This highlights the importance of having business insurance. It can really be the determining factor when it comes to whether or not your business survives a disaster. And while there’s no certainty that disaster will come, recent events have shown us that it’s better to be safe than sorry.
We understand that business insurance may be a foreign concept to some of you, this is why we’ve prepared a short guide that discusses the importance of business insurance.
To help you out even more we’ll also be discussing the different types of insurance to help you better understand what they’re for and whether or not you need them for your business.
Why Business Insurance
The first thing we have to address is why your business needs insurance. This is a normal question to ask considering that this could be a costly investment for you. We’ve listed down the three main benefits of having business insurance to help you understand where your money is going.
Protects Your Business
As we’ve mentioned above, having business insurance in times of crisis can be the determining factor of whether or not your business survives. It’s also a common misconception that business insurance only covers physical damage to your business or property.
Insurance can also cover losses should your business shut down due to unforeseen and uncontrollable circumstances. This should help cover the potential income that is lost along with your day-to-day operations expenses.
It’s also important to note that business insurance is vital for both big and small businesses. This is why it’s alarming that 75% of small businesses are underinsured, leaving them vulnerable to succumbing to the aftereffects of potential disasters.
Covers Your Employees
While business insurance aims to protect your business, this protection also extends to your employees. This shouldn’t be too surprising seeing as how well your business does will tend to reflect upon the people working with you.
There is also a specific type of business insurance that is geared towards protecting your employees while they’re on the job. This type of insurance can help cover the costs for any injuries sustained while on the clock.
Having this type of insurance also protects your business from any potential claims that could cost you a lot of money otherwise. This could come in handy especially if your business dabbles in work that carries a certain amount of risk to it.
Helps With Disasters
Lastly, the importance of business insurance cannot be overstated when it comes to how much it can protect you from disasters. Business insurance can act as a cushion for any unexpected financial setbacks your business may be subjected to in case of a disaster.
This is even more important if your business is vulnerable to disasters or accidents due to the nature of the job or the location of the business itself. Look no further than the economic impact of fires have on the US as a whole, to see how much businesses can struggle due to disasters.
While preventing such events from happening is important, it wouldn’t hurt to be prepared in case they do happen. Take note that business insurance will most likely be more expensive the more susceptible you are to disasters.
Types of Business Insurance
While there are many types of business insurance, these are the ones that have the most to do with helping your business out in case of disasters. These types of insurance deal with both natural and man-made disasters or accidents.
Commercial Property Insurance
This type of insurance focuses on the physical premises of your business or company. This includes both where the manufacturing is done and where you conduct your day-to-day operations if these two spaces are separate from each other.
Commercial property insurance also extends protection to equipment and the products owned by your business or company. The protection also applies whether you’re renting the building or own it yourself.
However, it’s important to note that commercial property insurance doesn’t always cover natural disasters. It would be in your best interest to clear this up with your insurance provider especially if your business is located in an area that is susceptible to natural disasters.
Business Interruption Insurance
Aside from damaging your property, disasters can also disrupt your business. This is what the aptly named business interruption insurance was made to address.
Business interruption insurance aims to counterbalance any losses that your business or company is subjected to in case your business ceases to function normally due to both external and internal factors. This includes things such as potential profits loss to daily business expenses.
The limits of this type of insurance can vary wildly depending on the industry that your business belongs in as well as the size of the company or business itself. Check-in with your business insurance provider in order to better understand how this type of insurance works for your business.
Worker’s Compensation Insurance
Lastly, worker’s compensation insurance won’t only come in handy in case of disasters but it is also mandated by law. Businesses that have employees are required to get worker’s compensation insurance, as a means of protecting their workers.
This type of insurance covers medical treatment for any and all injuries, ailments, and afflictions that your employees sustain on the job. This could save you from covering costs for injuries in case of any accidents or complications that your employees may encounter.
You may be thinking that jobs that are relatively low-risk have little use for this type of insurance. However, it’s important to note that accidents and natural disasters can happen at any time making this type of insurance invaluable to any business or company.
Factors That Affect The Cost of Business Insurance
It’s understandable to want to know where your money is going. This is why we think it’s also important to discuss the factors that affect the cost of business insurance. By knowing what factors contribute to the total costs, we hope to help you make a more educated decision on the matter.
A major factor that affects the cost of business insurance is the limits of the insurance itself. All types of business insurance only cover costs up to a certain point. The extent of different scenarios that a certain type of insurance covers can also drastically affect how much it’ll cost.
While being underinsured is certainly a bad thing, it’s important to remember not to overinsure as well. The last thing you want is to sign up for business insurance that is irrelevant or redundant for your specific company or business.
To avoid this from happening, be sure to clear things up with your business insurance provider. Doing so will help you determine the proper limits to your business insurance and save you from any unnecessary costs.
Location and Size
Logistics are also quite significant when it comes to the cost of business insurance. Where your business or company is located and how many employees you have under you will factor in when determining the cost for your business insurance.
The insurance industry has also started to take climate change into consideration when determining insurance policies. This means more insurance providers are inclusive of natural disasters, meaning higher insurance costs for businesses that are prone to such disasters.
This could lead to better coverage for flooding in coastal areas, but a higher price point for such coverage is expected. All of this is understandable considering how risk pretty much dictates the cost of insurance. The more risk, the more expensive it will be.
Nature of Your Business
Speaking of risk, the industry that your business belongs in also plays a huge part when it comes to the cost of business insurance. The more prone to risk, the more expensive it will be.
Businesses involved in the construction and mining industry can expect higher costs. The same can be said for businesses that are considered high-risk for fires. These types of businesses can expect higher costs for commercial property and worker’s compensation insurance.
Hopefully, this information can help you make an informed decision when it comes to getting business insurance. Looking at this as an investment to protect your interests rather than an expense will surely make the entire process easier for all parties involved.
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