5 Reasons Why Your Business Needs Commercial Insurance

by Redeeming Riches on May 8, 2013

Many small business owners are built to take risk. It is often seen as a part of what makes them willing to go out on their own. There is a difference, however, in being willing to take a necessary risk and unnecessarily exposing yourself and your business to significant losses.

Commercial insurance such as that offered by HSBC is a standard resource to help one minimise the risks faced in business. Here are 5 reasons that the normal small business owner should consider commercial insurance as an essential cost of doing business.

1. Product Liability Risks. The specific risk from product issues changes depending on the nature of a company’s business. However, even a retailer might be held liable if a dress or pyjamas catch on fire or cause a rash. It is a simple fact that when a consumer has a problem, the lawyers are going to go after ever company involved in the chain of distribution of a product.

2. Errors and Omissions Risks. The issue of professional liability is a reality for everyone that provides any form of advice or legal resources. This includes accounting firms, lawyers, engineers and a wide range of licensed or regulated professionals. The great challenge to this risk is that the firm or individual can be held liable for things they don’t do or even know about, in addition to actual mistakes and errors made.

3. Fire and Natural Risks. Just as with homeowners, thousands of businesses are affected daily by fires and other natural threats, such as storms and flooding. The difference with a business is that many times the source of the fire is beyond the control of the owner, coming from neighbouring structures. The reality is that over a 20-year span, statistics show that most businesses will suffer loss from either a fire, storm, or other natural causes, such as flooding.

4. Employee and Customer Risks. While most states mandate certain types of insurance to cover employees in work-related accidents, most business owners need to understand that both employees and customers can readily file a claim for any number of issues. It is reported, for example, that Walmart maintains a small army of lawyers just to deal with the thousands of slip-and-fall lawsuits it faces each year. Proper insurance not only covers the potential of a claim but also the cost of a lawyer to defend any claims that might be filed.

5. Business Interruption Risks. Depending on the statistics used, over 70% of the businesses that suffer an interruption in operations never reopen. The role of business interruption insurance is to cover the lost income to the business for a period of time related to specified interruptions. It makes it possible to correct damages or related reasons for closing while still paying bills and other liabilities.

Controlling the Risks

The whole concept of commercial insurance is to allow a business owner the opportunity to share the risks of being in business with other business people. If and when there is a need for a claim, the premiums paid cover the costs and are designed to allow a business to survive and continue operations.

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