A 2020 report by the Organization for Economic Co-operation and Development stated that, “Insurance companies paid out a higher amount in claims in 2019 than in 2018 in most reporting countries.” The increase in claims, as stipulated by the report, has been evidenced to be as a result of the pandemic. Covid-19 caused many businesses to seek financial aid and coverage from their insurers as a result of a loss in revenue amongst other issues. For these businesses, having a business insurance plan helped them cushion their financial fall. This illustrates the importance for businesses to have some form of business insurance.
It is often vital for businesses, especially small to medium sized businesses, to have insurance that covers them against anything that causes financial loss. Many small businesses are not able to recover from losses or any setbacks to the business in their initial phases, and having a business insurance plan helps prevent this problem.
Why is Business Insurance Important?
Any Company Can be Held Liable
Owning a business opens the door for the potential for lawsuits. Any company can be sued at any time for multiple reasons. It is important to note that even in circumstances where the company is in no way at fault, the company will need to hire and pay for any legal assistance. This can become extremely costly. Moreover, if the company is held liable, it will most likely have to pay some sort of settlement. This is especially true for instances where a consumer is hurt or injured on company property.
In instances where accidental fault occurs, such as a missed payment, which results in financial distress for a client or vendor, the company is equally liable. In cases like this, business insurance can help mitigate liability and aid with the financial burden of legal fees.
Incidents Beyond Company Control Occur
Accidents that are often beyond the control of the company happen every day. These accidents can occur because of natural events, like lightning, storms or flooding. These events can cause damage or destruction to company property, and even halt revenue. In addition to this, many companies rely on the work of computers. These computers can become non-functional if manufacturing issues arise, or there are damages to the inside. Similarly, malicious cyberattacks are becoming more and more prevalent. If these issues occur, they can prevent the company from creating revenue. Accidental cover is a very necessary aspect of business insurance, and not possessing it can cause companies to go unprotected in accidental incidents.
Most business insurance plans also cover theft. If a business is broken into, and security is not adequately maintained, businesses could lose inventory and other assets. In addition to this, company property could be harmed in the process. Theft coverage is a vital aspect of any business insurance plan, as theft is an incident beyond any company control, and it can result in substantial losses.
New small businesses emerge every single day. After the pandemic, and as a result of a growing remote workforce, many citizens are opting to create their own business from the comfort of their own home. One particular business type that has emerged in recent years, and has gained a lot of traction on social media, is candle making. Business insurance for candle makers, or anyone that is self-employed or runs their own business, is just as important as any other commercial business. TRUiC, or the Really Useful Information Company, has created a guide and explanation on insurance for candle makers. The company provides insight into many areas of business, as well as the financial market.
The pandemic served as a perfect illustration of why business insurance is important to every business, no matter the size. Often businesses are deeply affected by incidents beyond their control that ultimately prevent the business from creating consistent revenue. In some incidents, business operations can come to a complete halt. Small to medium sized businesses typically do not have the means of supporting themselves financially in circumstances such as these, and are then positioned to not be able to recover. This showcases why business insurance is so vital, as it protects and shields businesses from the risks and setbacks of running a business.
Image Source: TRUiC