One surefire way to lose your business is to keep it underinsured. You might need to save a penny or two until your startup takes off or profits get better, but cutting your insurance budget line is never the solution. If you do so and something happens, you could lose everything, and you’ve worked too hard for that. Here are four realistic scenarios to you to insure your business to the max, because you’re only as protected as your policy.
- Automobile Accident
Imagine your assistant left in her own car to pick up lunch for potential clients scheduled to visit at noon. She gets into an accident on the way back from the restaurant. It’s her fault. The other driver’s car is totaled, he’s injured, and he’s going to be off work while he recovers. Do you have insurance to cover his damages? Do you think he won’t go after you, too? He might. Your assistant was driving for your business. Make certain her vehicle is covered fully with a comprehensive automobile policy included in your business insurance package.
- Customer Injury
You’re a parts manufacturer and a national company uses your product in its new toy. The toy takes off like a rocket and the company doubles its part order. You and the company are relishing in the profits until the toy begins to injure the children playing with it. Testing shows it is your part that is failing. A class-action lawsuit is filed against the toy company and you, the faulty part manufacturer. You could lose everything without product liability coverage, which is something anyone who manufacturers parts and/or products should have, according to the SBA.
You are a certified public accountant and it is tax season. It’s your time to shine and make the bulk of your annual income. You have hundreds of clients and you work tirelessly preparing and filing their taxes. What you don’t know is your software program is malfunctioning, and all of your customers are about to get a nasty letter from the IRS. Do you have the money to cover their penalties? Professional liability or errors and omissions insurance can help you in the event you make a mistake on a client’s paperwork. This insurance is also good for professionals such as attorneys.
- Shut Down
You own a business in North Dakota and the weather reports warn of a horrific storm front coming in. You shutter everything and head home to safety. The blizzard is the worse your county has seen in decades. It will take weeks for everyone and everything to be shoveled out of the snow. You’re prepared. You have plenty of food, water, and your home’s generator is keeping the electricity going, but what about your business? Can you afford to be closed for weeks? Probably not, and this is why Entrepreneur recommends business interruption insurance.
It’s better to be overinsured than underinsured. You never know when something might happen that could cost you money. This is what insurance is for, to help prevent financial devastation in the event of an unforeseen circumstance. Make certain your business is covered in all areas to ensure you never have to face the nightmare of a claim or lawsuit you cannot resolve.