Most small business owners don’t worry much about insurance. They insure their stock, their vehicles and maybe their building if they own it, but usually that is about it. Most small businesses are exempt from requirements to provide health insurance or life insurance. However, while avoiding such insurances will certainly be good in the short term, it can be devastating – even bankrupting – in the long run.
The point of insurance is that it is intended to mitigate risk by spreading out the expense over time. While certainly some companies and individuals have been “saved” by insurance when it pays out bills they could not possibly pay, most small businesses do not have such catastrophic problems. Instead, the insurance keeps them from paying large expenses outright by spreading that expense across a long series of small insurance payments.
It is therefore necessary to insure against the sorts of threats the business is most likely to encounter regularly, instead of the occasional rare threat that is encountered once or twice – if at all – over the business’s lifespan. A good example is auto insurance for a company that has company cars are delivery vans. It is inevitable that these vehicles will get into serious accidents, even if their drivers are very careful and never at fault. So purchasing a good and comprehensive insurance policy is a great way to do this.
Likewise, if your business does a lot of borrowing and repaying, you will want to get insurance bonds to cover your payment. Surety bonds are now commonplace and essential in modern financial transactions, since they prevent companies from defaulting on one another. Even though you will no doubt win in court if you are not at fault, insurance bonds can protect you from poorly run or inadequately financed companies. In today’s economic hard times, one bad deal far away from your company can set off a cascade of defaults, ultimately leaving you unpaid for your work or unable to secure necessary financing. Proper insurance can enable you to stop that cascade and protect your business.
Lastly, study after study shows that employee health insurance consistently pays for itself. While many businesses consider health insurance an unnecessary employee expense, especially when the employees are minimally trained, the expense inherent in training and replacing employees is still high. Therefore, providing every employee with health insurance keeps overall costs down, while enabling you to have more value in each employee. The employees also feel better cared for and are thus able and willing to work harder due to their better health.
Article contributed by Jenna Smith