Financial Risk Management for Business Owners: The Role of Insurance

Whether you operate a large company or a small startup, you need business insurance. Every company does. The right policies can protect you from losses from fires, storms, auto accidents, etc. Just as importantly, adequate coverage can shield you from the financial repercussions of lawsuits against your business. 

Downplaying or ignoring business risks can come back to haunt you. Sadly, it’s common for businesses to cease operations due to the heavy financial burdens they incur when they’re uninsured or underinsured, and the unexpected happens. 

So, regarding financial risk management, business insurance is a critically important part of any sound strategy. 

Choosing the Right Insurance Coverage

Business insurance companies typically offer various policies to address different risks. That way, customers can pay for only the coverage they need. For example, a business that doesn’t own or lease vehicles doesn’t need commercial auto insurance.

However, every company needs some or all of these seven standard policies: 

1. Workers’ compensation insurance. Often referred to simply as workers’ comp, this insurance is required by states for virtually all companies with employees. It protects workers financially if they’re injured or contract an illness on the job. It can also provide a death benefit to the employee’s family in the event of a work-related fatality. 
2. General liability insurance. This policy covers damages and legal costs associated with injuries to non-employees, damage to other people’s property caused by your business and more. You can also add endorsements to customize your policy, including cyber, hired and non-owned auto liability, employment-related practices liability and employee benefits liability. 
3. Errors and omissions (E&O) insurance. Also called professional liability insurance, this type of coverage can protect you if a client sues your business, alleging you made mistakes in the professional advice or service you provided them. Note: Some clients may require this type of insurance. 
4. Business owners policy (BOP). Also called property & liability insurance, this type of insurance combines general liability protection plus coverage for the building you own or space you lease and any property needed to run your business. You can customize this policy with endorsements similar to a general liability policy.
5. Commercial auto insurance. If your company owns or leases vehicles, your state probably requires you to have this policy. It protects you from liability lawsuits related to operating your vehicles and also covers damage to them. 
6. Cyber insurance. Imagine someone steals sensitive information from you and uses it to commit fraud, or it’s reasonable to believe they will. This type of insurance can cover costs related to the theft, such as notifying customers, researching the breach, etc. 
7. Umbrella insurance. All liability policies have a maximum amount they’ll pay for a covered incident. If you’re responsible for a figure exceeding the limit on the underlying policy, an umbrella policy can pay the difference up to its limit.

Leading insurance companies have licensed insurance experts on staff who can answer your questions about which policies you need. 

Get Covered Today So You Can Focus on Your Business

Once you’ve “done your homework” and selected an insurance provider, you should purchase your policies promptly for two reasons. First, an incident can occur at any time, and if you don’t have an active policy to cover it, you may be left with a sizable out-of-pocket expense. 

Second, having sufficient coverage is the right thing to do for you, your employees and everyone who relies on your company. And with the financial security that business insurance provides, you can sleep better at night and be more focused on your business every day.

So, don’t wait! You can price, purchase and manage insurance policies online with many providers. And if you ever need to file a claim—and most companies do, eventually—you can also do that online for maximum convenience.