Top Reasons Why You Need to Insure your Business

Owning and running a business is no easy task, especially in the face of uncertainties that can hamper its growth at any time. Businesses are vulnerable to various risks such as interruption due to strikes or other unethical behaviour on the employees' part, natural or manmade disasters, or a dispute between two parties. In such situations, business insurance comes to your rescue. It covers loss of income, theft, employees' illness, injury, death, and more.
 

Why Does a Business Need Insurance?

 
Business insurance benefits you in many ways. Some of its benefits are mentioned below:
 

1. Mandatory for Some Businesses 

   Before moving any further, let us clarify that business insurance is not mandatory for all enterprises. However, it is recommended to have public liability insurance for some type of businesses. Others should purchase it for their protection. Businesses that should get insurance include:
    

   • Chemical Manufacturing Business 

     Chemical plants can affect not only the environment but also the workers and people living in their vicinity. Following the horrific Bhopal gas disaster in 1984, the Public Liability Insurance Act of 1991 made it mandatory for chemical sellers and manufacturers to get public liability insurance.
      

   • Restaurant Business

     If you are in a restaurant business, the risk of spilling hot food or sustaining injury both to staff and customers due to slick surfaces is constantly present. Moreover, as a restaurant owner, you are always at risk of facing allegations of serving harmful food to a customer. Therefore, you must have mandatory public liability insurance.
      

   • School and Colleges

     If you run a school or own a college, make sure you have your business insured. The reason is that hundreds of students are at risk of being injured in the event of a fire or other tragic occurrence.
      

   • Contractors 

     If you are a contractor who works on projects such as building construction, electrical work, or plumbing, you must purchase public liability insurance. The reason, contractors are always at risk of property damage, bodily injury, and equipment damage.
      

   • Hospitals

     The possibility of false accusations, risks associated with heavy equipment, and the risk of a fire outbreak are always present for hospital business owners.
      

2. Saves from Natural Disasters

   As a business owner, you are always ready to deal with external factors such as a new trade policy, the RBI's benchmark rate, and inflation as these factors can significantly impact your company's profitability. But, what about natural disasters?
    
   Natural disasters can result in financial losses due to office space damage, building collapse etc.  insurance protects you in the face of nature’s fury. It covers your financial losses caused by cyclones, tsunamis, earthquakes, and other similar occurrences.
    

3. Employee Retention

   Whether it's for your customers or employees, safety is paramount. To retain your skilled and experienced staff, you must assure them that their hard-earned money will not be delayed or forfeited, no matter how difficult the phase your business is going through. Moreover,  insurance provides medical benefits to employees and their family members. You may also provide them with life insurance benefits depending on the coverage chosen.
    

4. Makes Your Company Trustworthy

   Another importance of insurance in business is that it makes your firm trustworthy. Insurance improves your reputation among both customers and clients. Let's look at two examples to understand this point better.
    

   Example 1—from the client’s perspective

   Assume you are a supplier that sells raw wood to furniture manufacturers. Your client, Company XYZ, places an order for specific quality woods worth Rs 5 lakh. Unfortunately, before you could make a delivery to them, a cyclone hit and ruined the underlying wood stocks. In this case, the insurance company will cover the client's damages.
    

   Example 2—from the customer’s perspective

   Assume you run a showroom that sells electronics and home appliances. Mr Y comes into your store and orders two air conditioners, one refrigerator, and eight laptop computers for his workplace. Unfortunately, these products get stolen while in transit. In this case, the insurer will compensate for such losses. 
    

5. Deals with Lawsuits

   Litigation is one of the many risks that businesses face. A lawsuit can damage your company's reputation and result in the loss of existing as well as future clients. You may find yourself in this situation due to various reasons such as wrong agreements, failure to meet a client's requirement for any legitimate reason, an accident if you are in the tour and travel business and transportation business, and more. But if you have insurance, you can lead your company without stressing much about court cases. 
    

6. Ease in Getting Loans

   Insurance also assists you in obtaining business loans. Since insurance saves your firm from several unfortunate events, financial institutions readily approve you for a loan. It may also help you secure a lower business loan interest rate.
    

Also Read: A 2-min Guide to Collateral Free Business Loan
 
Now that you understand the benefits of insurance in business, it's time to look at the different types of business insurance.