Insurance coverage is one of those fees associated with owning and operating a business that may not seem valuable when the budget is tight. There’s a real, tangible nature to keeping the lights on, the internet connection operational, and the office space rent paid up. But when it comes to insurance, you’re happy you have it when something goes wrong. It’s the rest of the time, when business seems to be sailing along, that you could be led to question the value of your policy and even doubt that you need it. That’s especially true as costs rise across the board and you find yourself in need of assets.
Here is where we have to jump in and recommend that you stay the course. Even dealing with one loss can make or break a business–that’s just not worth risking. At Althans Insurance, we help business owners identify and close coverage gaps before they become costly mistakes. Here are a few more reasons why insurance is vital for businesses, along with the most overlooked consequences of going without the right protection.
Why Some Businesses Skip Insurance
We’ve already mentioned cost concerns, and that’s all too real for many businesses today. Premiums might feel expensive, but they’re pocket change when compared to the potential costs associated with lawsuits, property damage, or compliance fines.
Another reason why businesses may avoid insurance is the “it won’t happen to me” mindset. And that may feel true for a time. However, life happens, and worst case becomes reality for businesses every day. Once the risks you brushed off come knocking, it’s too late.
Confusion over available coverage options could be another reason why business owners put off insurance protection–it just feels too overwhelming. This might feel valid when there are daily operations to keep track of and employees to manage, but without proper coverage, everything could fall apart should disaster strike. A friendly team of experts–like the folks at Althans Insurance Agency–is always ready to answer your questions and make experience-based recommendations.
Overlooked Risks for The Uninsured
Maybe you identified with the above reasons why business owners bypass insurance coverage. But in the end, the cost of not having insurance in the face of a loss will always be higher than the cost of carrying it. Here are some risks that maybe you haven’t considered, but that should prompt you to investigate available coverage options before these scenarios strike.
1. Out-of-Pocket Legal Expenses
Try as you may to foster a safe environment and produce tested, safe products and services, every time your business interacts with a customer, risk rears its head. There are chances for liability claims left and right, from a slip-trip-or-fall incident to the claim of injury or financial loss from a product or service.
Without general liability or professional liability insurance on deck, you could be looking at mounting out-of-pocket fees for medical bills, legal fees, settlements, damages, and more. A single liability claim can run into tens of thousands of dollars in attorney fees, even before a judgment is reached. Without business liability insurance, those costs come straight out of your company’s pocket and could be enough to put a small business under.
2. Loss of Business Assets
Fires, storms, floods–there are plenty of ways that businesses can suffer in the wake of disasters. Your building, inventory, or equipment could suffer severe damage or even total destruction. The needed repairs, replacements, and cleanup costs, along with the financial stress of interrupted business operation, could be impossible to shoulder.
For many businesses, that level of unplanned expense could bring you to the brink of closing. The reality is that property damage from fire, storms, or vandalism can devastate your operations. Without commercial property coverage, rebuilding costs fall entirely on you.
3. Interrupted Cash Flow
If previously mentioned disasters or situations come to pass and you are forced to stop operations for a time, due to a lack of supplies, facilities, or workers, how would you manage? Not producing your products or offering services means no cash flow. That means that key expenses like rent, utilities, and payroll are coming directly out of your pocket during downtime, with no money flowing back in to cover the cost.
Much like many people live paycheck to paycheck, many businesses rely on incoming orders and scheduled services to keep the lights on and keep things moving from one month to the next. Without that steady income stream, many businesses are forced to close permanently. Even worse, small business owners’ finances are often tied up in their business, and a break in income that forces closure could lead to personal financial ruin, threatening their family’s financial security too.
The bottom line is that when operations are halted after a loss, uninsured businesses often can’t recover quickly. Business interruption coverage can replace lost income while you rebuild.
4. Reputational Damage
Consumers want to know that the companies they interact with and purchase from are professional, reliable businesses that take the steps necessary to protect their employees and customers. Carrying needed insurance policies shows that you take your responsibility seriously and lets customers know that even in the event that disaster strikes, you’re prepared. They will have less perceived risk when doing business with you.
The opposite is also true–being uninsured tells potential customers that you don’t take their safety seriously and that perhaps you aren’t trustworthy. Not only can you lose customers and your reputation if worst comes to worst and you are unable to honor your obligations, but if your finances are tied up in your business, you could also stand to lose a lot more. Situations like these often spell the end for businesses.
Failing to meet client obligations because of a loss can harm your credibility and client relationships long-term. Without commercial insurance coverage business you won’t have recourse to uphold your side of the contract.
5. Lost Opportunities
Customers aren’t the only ones who care whether or not you’re protected against risk–so do landlords, vendors, creditors, lenders, and others who are pivotal to the success of your business. Many of these folks have a lot to lose if things go sideways when doing business with you. They will often require that you carry adequate insurance before they even consider a contract. That’s because without insurance, you aren’t just risking your business, you’re risking theirs too.
Without proper insurance coverage, you could be passing up that big win. The cost to your business could be far greater than the price of an insurance premium. Lack of insurance can hold back growth and credibility, since many contracts and leases require proof of insurance. Without business insurance coverage, you might be disqualified from new projects or partnerships.
Uninsured vs Underinsured
So far, we’ve been talking about uninsured businesses, but another slice of the demographics is those who may carry some form of insurance, but who, in all reality, are far underinsured. For these folks, in a worst-case scenario, inadequate insurance coverage means that there could be a sizable gap between what insurance pays out on a claim and the true scale of their loss. In that case, being underinsured is nearly as bad as being uninsured, as all the above risks are still at play. Without proper insurance coverage, business owners can still risk steep out-of-pocket expenses, irreplaceable loss of business assets, business interruption, reputational damage, and lost opportunities.
For those who have insurance that doesn’t cover all their risks, they could be looking at partial or denied claims if limits are too low or extensive exclusions apply. To keep your doors open, you’ll need to handle the costs yourself. That could lead to prolonged downtime, layoffs, and regulatory issues. It truly does pay to have adequate insurance that is tailored to your business’s needs.
Sometimes, businesses may have had adequate coverage at one time in the past, but with business growth, outdated valuations, and inflation, coverage has fallen far under what it should be. Certain sectors are especially at risk, but all businesses should be paying attention or risk exposure could lead to heavy financial loss in the event that they need to file a claim. Other times, business owners may have an unrealistic expectation of how quickly they can recover in the event of a loss. Rebuilding takes time, and without adequate business interruption coverage, you could be left floundering halfway through repairs.
Liability gaps are also worrying, and can easily crop up as businesses expand operations, add services and capabilities, or adopt new technologies. Risks like cybersecurity threats and professional liability exposures can cut a business down at the knees if insurance coverage isn’t there to step in and help.
The very best way to protect your business and prevent the risks associated with being underinsured is to conduct regular insurance audits. Your trusted local Althans Insurance agent is happy to help, with key insights and an understanding of the unique risks that your business faces. This is just one reason why we suggest at least yearly reviews of coverage levels. When your business grows, your first call may not be to your insurance agency to increase liability limits. Annual meetings with our team take the responsibility off your shoulders and put your business’s safety in the hands of experienced insurance professionals. We will work with you to ensure that your business is accurately valued and provided for should the worst come to pass. We can also assess and evaluate emerging risks that come with evolving markets and the current climate of doing business in the modern world.
Work Closely with Your Trusted Althans Insurance Advisor
Lack of adequate insurance protection can be the final straw that ends a business. This is a real, everyday, long-term threat that can lead to operations being disrupted, financial reserves being drained, and sustained growth being jeopardized. Even companies that carry insurance need to ensure that their coverage keeps up with their risks.
Now is the time to be proactive. Annual reviews with our team of advisors will ensure that valuations are up-to-date, risk management strategies are in place, and that every potential downfall is accounted for. In as unpredictable and volatile an economic and regulatory environment as we’re currently experiencing, no business can expect to weather its risks alone. Instead of just another expense, insurance is an evolving investment in the successful future of your business.
Close to half of small businesses don't reopen after a major disaster–there’s no need to add to that statistic. Now is the time to ensure that your business is protected. Althans Insurance advisors are happy to help you find that just-right insurance protection for your business with customized plans and a range of carrier options to ensure that you’re getting the best options. Our insurance professionals know what local risks you may face and work hard to build out policies that cover those potential mishaps and losses. And if and when that day comes, when you’re glad you have coverage, you can rest assured that we’ll be there to help guide you through.
Now is not the time to risk what you’ve built–it’s time to invest in your ongoing growth and success. At Althans, we believe that insurance premiums aren’t just another bill; they’re an investment in protection that’s provided when you need it most. Contact us today to learn more and get started on a path to business protection