Risk Management Through Insurance
Any business, whether big or small, has some risks attached to it. These are called Inherent Risks. For example, if you own a grocery store, one of the inherent risks attached to the nature of the business is slip and fall injuries to either employees or the customers. While it is impossible to completely eliminate the risk, you can certainly take measures to minimize your losses incase of exigencies. Business Insurance policy is a great tool to minimize your losses. Assurance policies like general liability insurance or professional liability insurance indemnify your businesses against losses due to litigation and make payments incase of successful litigation against your business or to cover losses to business in case of accidents.
General insurance needs for businesses
Risk assessment is the first step to risk management. Given below are some general insurance needs that are common to most businesses.
- Mandatory coverage: Though the mandatory coverage needs differ from state to state, there are some common issues you need you to consider. Some examples of these are automobile or vehicle liability insurance and worker's compensation insurance. Depending on the nature of your business, it will be mandatory as per state and federal laws to provide adequate benefits in case of exigencies for which your business in held liable. The topic of liability insurance is covered in detail below.
- Property and Product damage: This is for covering losses or damages to your property or products due to accidents, fire, explosions, vandalism, theft etc.
- Medical and Health Insurance: Employee medical insurance has become a vital benefit that is offered by most successful businesses. This not only boosts employee morale but also helps increasing your workforce productivity.
- Business Continuity and Disaster Recovery: Incase of large scale damages due to accidents/ fire/ terrorism etc, an appropriate insurance policy will pay for expenses that are required to keep your business alive. Some examples of such expenses are rent and utility bills, salaries of employees or losses in profit due to the exigency.
Reasons for purchasing Liability Insurance
Today we live in a highly litigious society. Even small mishaps, unintentional or merely negligent in nature can result into large lawsuits. Moreover, courts usually tend to be more sympathetic to claimants in cases of injury and damages than with business owners.
In such cases, the chances of successful litigation and claims against business owners are very high. Apart from litigation risks, the businesses also need to manage their reputation. In today's competitive world, the reputation of a business can decide its success or failure. As a result, business owners might need to pay off claims made by either their customers or employees. In cases of high pay outs, the assets and the cash reserves of the business may get hit severely. Therefore a liability insurance policy can save your business from potential losses.
The requirement of insurance will differ from business to business. Carrying out an effective risk assessment would help you identify the adequate insurance needs and thereby safeguard your business against unnecessary losses.