Many business people often contest the need for business insurance. You may think that business expenses should be directed toward marketing and production to keep the business profitable. However, insurance is essential to every business. Here are a few reasons why.
Statutory Requirement
Some types of insurance are a government requirement in any workplace. For example, the Australian Government expects employers to have worker's compensation insurance. Professional associations also compel licenced practitioners to take specific types of insurance. For instance, a medical organisation could ask its members to apply for medical malpractice insurance. Conversely, a contractors association could require members to take general liability insurance, while a removalists organisation could ask members to take removals insurance.
Why do you need to meet statutory requirements? Well, most of your clients conduct due diligence before engaging your business. Therefore, they will only consider companies with the required insurance coverage. Moreover, most professional associations will deregister or penalise your business if it does not meet the prescribed requirements. Once deregistered, you damage your reputation and miss out on many opportunities available to registered companies and practitioners.
Risk Management Strategy
Insurance coverage is the perfect risk management strategy for your business. Ideally, the cover prevents your business from going down in the occurrence of a covered peril. For instance, if you run a logistics firm, you risk losing inventory if a fire erupts in your warehouse. Similarly, if you are in the service industry, you risk your reputation and loss of funds if a client suffers damages or injuries due to your negligence. It is hard to foretell when such events occur, and insurance coverage is your only protection against financial losses once these events occur.
Insurance Enhances Your Business Image
Did you know that insurance coverage can enhance your brand image? For example, suppose an employee suffers an injury when working at your premises. In that case, there is a probability that word will spread among friends and colleagues that they have suffered a workplace injury. If you have worker's compensation insurance, the coverage pays their medical expenses, rehabilitation costs, loss of wages, and property damage. Once this happens, your employee will likely spread the good word about their workplace. However, if you do not have insurance coverage, you could experience a PR nightmare. If you are a contractor, your clients expect you to have extensive insurance coverage. If an accident occurs and you do not have insurance to offer compensation, you put your reputation at risk. Therefore, you shouldn't be surprised if your clients consider other contractors.
For more information about different types of business insurance you may need, contact a local insurance provider.
