How Business Insurance Shields Small Companies From Financial Freefall

Owning a small business comes with its share of joys and troubles. You not only have to worry about customer satisfaction, inventory, and staying on top of rent for your location, but you also have to consider the implications that insurance can have on your endeavors, especially when disaster strikes.

Disastrous happenings, which include everything from horrific break-in robberies to unexpected natural disasters, can have terrifying consequences on businesses that remain underinsured.

However, there is hope and solutions for those looking to protect their assets. Small business insurance can mean the difference between keeping your business afloat and having it sink to the bottom.

Small businesses are often the most affected by natural disasters and other catastrophic events. The US Small Business Administration has stated that 25% of businesses won’t open again after a disaster. This is a staggering number to comprehend, especially when one considers how many businesses are not backed by large corporations.

Significant losses, which include fires, lawsuits, and data breaches, can cause a small business to fail quickly. While the immediate damage can cause pressures for a small business, it is often the financial difficulties that follow that ultimately lead to its failure.

Though business insurance may seem like a solution that can fix every problem a business owner may ever have, it is not a one-size-fits-all approach. Instead, it is a collection of protections that are designed to interact with specific parts of the business as a whole.

Some of the things business insurance covers are:

• General Liability Insurance: This form of insurance often protects against third-party claims of bodily injury or property damage.
• Business Interruption Insurance: This coverage compensates for lost income when operations are halted due to insured events. This protection can prove invaluable for those whose businesses are affected by issues such as natural disasters or unforeseen events like fires.
• Cyber Liability Insurance: This allows for the recovery of income lost due to cybersecurity threats or downtime, such as that incurred during system outages.

Most people, when thinking of insurance, consider things that happen in their daily lives and what is covered as a result of their home, auto, and healthcare coverage. When disaster strikes, these types of insurance work to remedy the situation, oftentimes without severe financial consequences to you.

Like home, auto, and health insurance, business insurance branches out in multiple directions to protect you and your business from severe threats, including those that can occur as a result of being underinsured. Skimping on this type of insurance can often create dangerous multiplier effects, in which small savings generate much larger losses.

A 2023 Hiscox Underinsurance in Small Business Report indicated that 75% of businesses were underinsured, and over 70% did not comprehend what business insurance covered, further compounding its importance for business owners.

Knowing how to understand business insurance is one thing. Being able to comprehend how circumstances beyond your control can affect your business is also crucial in today’s world.

Knowing how to seek business insurance and what it covers is one crucial factor. Not all insurance policies include added protections against climate-related events, nor will everyone offer cybersecurity options to help protect against cybercrimes in an era of increasing scams.

Knowing how to seek out business insurance can also assist you in developing financial habits to improve your business. As growing businesses adapt to the financial world around them, it will be essential for business owners to understand the challenges that can arise not only internally within a business but also from external sources. Having adequate small business insurance can help you not just in the present but in the future as well.