Running your small business without carrying insurance is a risky proposition. While the added expense may seem unmanageable, the financial disaster that can result from unforeseen perils can put you out of business swiftly and suddenly. It is wise to find room in your budget for premiums that protect you from liabilities resulting from human error and natural disasters. While minimal damages can be dealt with, large crippling catastrophes can fell even a well-capitalized business. Examine some scenarios in which insurance is crucial to the continued success of your operation.
Retail merchants carry inventory and may even own the building from which they sell a product. Commercial insurance policies offer property insurance that protects physical stock and structures that house it. Property insurance values commercial buildings in two ways: actual cash value or reconstruction value. Actual cash value allows a business owner to insure a building for market value. Reconstruction value is typically determined by the insurer, allowing the insured to replace all or part of a damaged structure with similar construction materials. Without this protection, replacing a major asset such as a retail shop may not be feasible.
When customers and vendors pass through your doors, the chance for injury always exists. The ability for that person to file a claim against you or your business hinges on negligence. The law views negligence as how much responsibility you bear in contributing to a slip and fall injury, for instance. Was there a loose floorboard that you knew about but did not repair? That scenario can lead to a large legal judgment for which you may be fully or partially responsible. The injuries suffered by the aggrieved party can run into a high, five-figure dollar amount. Without liability insurance protection, that judgment can completely exhaust any liquid or real assets you own, leaving your business in a precarious position.
Completed Operations Insurance
Part of insurance policy premiums paid by building contractors goes toward paying claims to damages incurred through faulty construction. As with the business owner who neglects to address a problem, personal injury can result from a poorly constructed deck or porch. While you may intend to perform quality work, not every aspect of that construction may be sound. Should that deck or porch collapse, a plaintiff may sue you and win. Depending on the severity of the injuries, the amount of damages awarded may be too much for your business to bear.
Errors and Omissions Insurance
Service professionals such as accountants and financial consultants offer advice that often involves large dollar amounts. Tax laws change and stock markets crash, leaving a client to question whether your advice was prudent in the face of a significant loss or liability. Your innocent mistake in calculation or ill-timed investment advice, while unintended, may still warrant a large settlement. Errors and omissions insurance covers you in the case of an oversight, but only if you’re wise enough to carry it.