The Dangers of Under Insuring Your Business–and Why You Need to Protect Yourself
Did you know that 80 percent of businesses fail not because they cannot compete in the market, but because they are unable to cope with financial stress? It’s not just individuals who need to think about their own financial security; businesses need it too.
Underinsuring your business is a risk that many small business owners take. Even though it might feel safer because you know that your business won’t be able to handle a big loss, under insuring actually exposes you to more risk than if you equip yourself with the proper insurance coverage. This article will talk about some of the dangers of underinsuring your business so that you can protect yourself from financial stress and even failure.
Why You Should Care about Business Insurance
Here are a few reasons why this financial security is so important:
- You might need to pay for unexpected costs.
- If your business grows, you won’t have to worry about growing your coverage
- You want to protect your employees’ salaries
- You want to protect your business’s future
- You want to protect your business’s assets
- You want to protect your customers
When you don’t have insurance, you’re putting all of these at risk. You’re not only putting your business at risk but also your employees’ livelihoods and your customers’ trust in your company.
Equipment and Property Losses
Losses stemming from your equipment and property damage can be extensive. Think about all the equipment bases assets you have:
- Your computer systems (be sure not just to cover the hardware but also the data)
- Your website
- Software
- Inventory
- Tools
- Machinery
- Vehicles
In most cases, you should be sure to have coverage for the value that these items would be worth if they weren’t damaged, lost, or stolen. Machinery and vehicles can cost thousands of dollars to replace, especially if you don’t have the money readily on hand to do so.
Human Resource Losses
If you lose an employee, you might not just lose their time but also their expertise. Some types of losses you could be protected against include:
- Lost wages
- COBRA premiums (for terminated employees)
- Disability coverage (if an employee gets injured or sick)
- Health insurance premiums
- Health care costs – Outplacement (for terminated employees)
- Vacation pay
- Termination pay
It’s important that you have the coverage that matches the size of your company because you don’t want your business to suffer because an employee had to leave.
Marketing Losses
Marketing campaigns can be expensive but they’re important for growing your business and getting your name out there. If you have a sudden loss with your marketing budget, you could be putting your business at risk.
- Some losses that you could be protected against include:
- Your PR budget
- Your marketing budget
- Your marketing team’s salaries
- Your website costs
- Your website maintenance costs
- Your social media costs
- Your branding efforts
Your PR budget should be looked at as a one-time loss because it’s often for a specific reason. But marketing is something that you’ll have to maintain and it can cost thousands of dollars every month. Having coverage for these costs can be a huge help when they come up unexpectedly.
Financial Institution Losses
If you rely on a financial institution to fund your business, you want to be sure that you’re protected in the event that there’s a loss. If your business can’t repay the money, the financial institution could come after you for the loss.
Some losses that you could protect against include:
- Interest
- Repayment schedules
- Fees
You don’t want to put your business at risk for something that you can’t control. Having the appropriate insurance coverage can reduce your risk and help you sleep better at night.
Insuring your business properly is critical
Underinsuring your business is something that many business owners do. It’s easy to look at the cost of insurance and think that you can’t afford it, but it’s important to remember that you’re not just protecting your company’s assets—you’re also protecting your employees and customers.
A little bit of insurance goes a long way.
