Starting a business always has inherent risk. Now since Covid-19, the risk may even be greater than ever before. However, many are taking the plunge. Whether it’s due to job loss or making use of the crisis to pivot their careers, many new businesses are taking off.
With other risky endeavors, most don’t hesitate to take out insurance in order to protect themselves. Many get life insurance to make sure their families are taken care of. Rental insurance, health insurance, warranties on large purchases, the list goes on and on.
However, with one of the riskiest tasks you can pursue in your life, people scoff at the idea of taking on business insurance. According to entreprenueur.com, around “80 percent of small-business owners don’t have small-business insurance” and solely rely on personal insurance instead. This can ultimately be a huge and costly mistake and the demise of many businesses.
Business insurance is one way to alleviate risk, just as forming an LLC is, but there is a lot of misinformation and stigma floating around about insurance. This article aims to clear this up, because not only should entrepreneurs have business insurance, in most cases they NEED it.
What Stops Business Owners from Getting Insurance?
The reasons most owners avoid business insurance fall broadly into two buckets. The first involves owners who believe that whatever they need protection from will never happen to them. This is a dangerous way to approach insurance that can open you up to significant risk down the line. Most would never think about their health or family’s wellbeing in terms of probabilities, why should you treat your business any differently?
Insurance is just another layer of protection. To an entrepreneur, their business is most likely their life’s work. Anything can happen as we’ve learned from Coronavirus, and any number of events could happen in five years or even a decade. This mindset shift should lead you to evaluate the long-term benefits of proper business insurance.
Finally, it is a common failure of human psychology to believe we are special and different. We feel we are the exception to the rule, until the very moment that we aren’t. Much like a gun, the moment that you need it most will probably be the moment you most regret not having it.
The other group of business owners are those who believe they are too small or don’t generate enough revenue to warrant the additional cost of insurance.
On the surface this might makes sense to some, but in the early stages it is all about growing as fast as possible until you become sustainable. Thinking this way from your first steps puts you in a scarcity mindset. Where do you draw the line at being ‘big enough’? Many business owners may simply be fooling themselves when it comes to their inability to pay insurance premiums.
Why not skip the hassle of deciding every year whether you should or not have at least minimum liability business insurance? Instead, go with the best business liability insurance provider who will help you understand which different insurances a business might need. Lock in a good price with an insurance provider while you are small, before the costs starts multiplying along with the size of your business.
Why You NEED Insurance
The most common insurance types in our lives are mandatory by law, such as car insurance or homeowner’s insurance. The fact of the matter is that many business industries also have mandatory insurances.
If your business requires a license to operate, the odds are that as part of getting licensed, you will also need specific insurance. It is incredibly important to double check this on the local, state, and federal level. There are plenty of horror stories abound of those that didn’t know about a requirement, and midway through operations, found themselves with their business shut down until further notice—a business owner’s nightmare.
A classic example of a heavily licensed industry is food and beverage. Here you have a different license for every niche, be it a bar, restaurant, or catering. Within these industries, depending on the type of business, there is likely a minimum requirement for business liability insurance. This is to protect, for example, against injuries on the premises of your business.
You would be surprised just how many different industries require licenses and by extension, insurance. Even things such as providing food to the homeless requires a license in many cities!
Protect Yourself Before You Wreck Yourself… Insurance Is Not Just for Your Health
Don’t get caught like a deer in headlights. A little research can save you a whole lot of frustration down the line. Even if you aren’t required to have insurance, many of the reasons why insurance is required, such as protecting business owners against liability, may apply to your business regardless. Just because it isn’t mandatory doesn’t mean it doesn’t make sense.