As an entrepreneur, you might be so focused on small business opportunities that you forget about a very important issue: insurance. “Why do I need insurance?” you ask. “I thought I only need it in my personal life.” When you’re starting a small business, insurance is actually critical. This article explains why small businesses need insurance, and what kinds you should purchase.
BUSINESS ADVICE: WHY YOUR COMPANY NEEDS INSURANCE
In June 2013, floods swept through Calgary. Over 75,000 people evacuated the city. The flood affected 4,000 businesses in the city. The Calgary Chamber, the city’s chamber of commerce, estimated that employees in the city lost 5.1 million work hours.
The flooding in Calgary posed a huge expense for businesses. They lost income as a result of flood damage to their facilities, and companies without insurance had to pay out of pocket for on-premise repairs. Flood waters destroyed inventory or caused it to spoil, yet another cost for businesses to bear.
Insurance played a vital role in helping Calgary businesses resume operations – it provided compensation that assisted those organizations in overcoming significant financial loss.
DON’T NEGLECT INSURANCE WHEN STARTING A SMALL BUSINESS
You might say, “Well, my business isn’t located in a flood plain like Calgary. So, I don’t need insurance.”
It doesn’t matter where you’re starting a business – insurance is still a necessity. Flood insurance isn’t the only kind of insurance on the market. Let’s say you’re running a delivery business. You need vehicles to make those deliveries. Vehicle insurance protects you against theft.
Here’s another reason why you need insurance when starting a business: liability. The term “liability” comes from the field of law. It refers to an obligation that an individual or company has to someone else. We’ll illustrate the term with an example. Jack works at an international shipping company. One day, he’s loading a box onto a pallet. Because the firm won’t provide him with the safety equipment he needs to perform his job without injury, Jack hurts his back badly. Liability insurance covers injury to clients or employees at your place of business. There are two other forms of liability insurance: professional and product. Professional liability insurance protects you against a client suing you for errors or negligence, while product liability shields you from lawsuits in the event you create a defective product.
We’ll go back to the example of Jack for a moment. Jack’s employer doesn’t offer health insurance, which would have paid for Jack’s medical bills that provincial health plans don’t cover. Although a health insurance plan isn’t obligatory for businesses, it will help them attract and retain employees.
DOES EVERY BUSINESS NEED INSURANCE?
You might think that a home-based business is the best business to start because you’ll have fewer insurance issues. That isn’t true.
If you’re an entrepreneur supporting your family, life insurance is crucial. Should you die unexpectedly, life insurance will help your family pay off debts you’ve incurred while launching your venture. Death isn’t the only tragedy that could befall you. What if you become disabled or critically ill? Disability insurance and critical illness insurance give you and your family the financial assistance you need to assist you during this difficult time.
When you’re researching business tips, one of them should be about accounts receivable insurance. Sometimes, clients can’t pay you. That becomes a problem when you can’t pay your own creditors. Exporters are at an especial risk of this, which is why Export Development Canada offers accounts receivable insurance to cover Canadian businesses in the event their foreign customers can’t pay their bills.
WONDERING HOW TO START A SMALL BUSINESS?
When you’re trying to launch an entrepreneurial venture, you’ll need financing. Lendified can help – we provide small business loans to Canadian businesses. Contact Lendified today to learn how we can help you!