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Small Business Insurance: Small Business Risk Factors

Risks Involved In Small Businesses

Small business involves a lot of risks. There is personal and financial risk in starting a small business. However, you can identify some predictable and unpredictable factors that are particularly risky and take suitable measures to counter them.

Predictable factors are controllable to some extent, such as:

  • Taxes
  • Change in the volume of expected sales
  • Cost of supplies and equipment
  • Overhead costs
  • Salaries
  • Cost of goods and services you offer

Unpredictable factors include:

  • Changes in trends and tastes of customers
  • Impact of the local economy on your customer base
  • Any unexpected action taken by your competitors

Various other factors can cripple your business, including the obvious risk of accidents, injuries and fire.

Ways To Counter Risk

There are three ways for a small business owner to deal with risk:

  • Take measures in eliminating risks
  • Supervise and manage everything yourself
  • Insure

Since attempting to eliminate risk on your own can cause you financial problems, it is advisable to transfer the risk in the form of insurance. An insurance agent will be of great help by guiding and handling your insurance needs. You can also make use of the various small business policies that are designed to cover your small business.

Insurance For Small Businesses

The insurance policy for your small business must cover:

Business Property Insurance: This will insure the physical building where you run your business. You will have to insure the building if you own it, otherwise the landlord or property owner provides the coverage. Business property insurance will cover your personal business property such as chairs, tables, computers and other equipment. Damage from earthquakes and floods, or loss of income due to some kind of disaster, is also covered under this insurance.

Liability Insurance: CGL, or a Comprehensive General Liability policy, is intended to provide coverage to third parties. At times, some policies will not include personal injury and advertising coverage, contingent upon the services your business offers. In these cases, a Professional Liability, Malpractice, or Errors and Omissions policy could be available for your kind of business activity, which will cover the errors and oversights that could result in a lawsuit being filed against you and the business. This is particularly applicable for occupations where higher standards are held, like medical practitioners, lawyers, real estate agents and insurance agents.

Liability insurance also includes Fire Legal Liability, which protects you if your negligence causes loss or damage to the property that you leased for your business.

Worker’s Compensation Insurance: This is an essential insurance if you have employees working for you. The state compensation fund may accommodate your needs on this front initially, upon starting up a small business, but once your employee base increases along with your business activities, you can shop for a better policy. You, as an employer, need to provide your employees a safe workplace and equipment. It is important to warn them about any existing dangers in the work place. If you fail to provide them with this information, they can file damage suits against you if they are injured. Therefore, it is necessary to cover all employees with this insurance. You can reduce the premium of this policy by providing your employees an accident-free work environment.

Other Insurance: These include company automobile insurance, health insurance for your employees, etc.

Life Insurance: Life insurance can fund your buying and selling agreement if your business partner dies, and provide for business continuity if something unforeseen should happen to you (death or permanent disability).

As a small business owner, you should not consider the expense of insurance policies to be a burden. Insurance can decrease the level of uncertainties, your business risk and increase your opportunities to be successful.

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