Do you know the trouble an uninsured entrepreneur go through? We know that when starting a business, resources are limited and it is necessary to go easy on costs. Commercial insurance is often at the top of this list of budget cuts, particularly for establishments where accident risks seem low.
What is your plan in the event that a client is not only dissatisfied with your work, but also takes legal action against your service provision? Or if a visitor slips inside your establishment because someone forgot to put up a “wet floor” sign?
It is precisely at times like these that your insurance proves to be essential. A well-insured company runs much less risk of bankruptcy and can guarantee the health and care of the customer, the employees, their financial life and their legal life.
An uninsured company can be exposed to market adversities, climate instability and political and environmental changes in the world. Get to know now the perrengues that business owners suffer from choosing not to take out the insurance due.
6 Troubles an Uninsured Entrepreneur Can Go Through
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#1: Fines and imprisonment
Unlike your auto insurance, most commercial insurance is not required by law. However, depending on the laws of the state in which your business operates, you may be required to purchase:
- Workers’ compensation if you have employees
- Commercial auto if a vehicle is used in operations
- Professional liability for certain professional services
- Liquor liability if you sell alcoholic beverages
The lack of these coverages violates state laws and, in many cases, is considered a felony. If you don’t have the right insurance, you could face hefty fines and, depending on the situation, spend time in jail.
#2: Your company without financial protection
It is important to remember that although some type of insurance is not mandatory by law, if your company is responsible for personal or material damage, you will still have to bear the costs and legal consequences.
Insurance essentially serves as a backup for times when your business is faced with an emergency, such as an injured or dissatisfied customer about to sue. Situations of this type can bring damages that are difficult to predict.
Damage to the company’s image, costs with legal defense, medical bills, losses that are already high individually, but together can lead your company to bankruptcy.
When taking out your company’s insurance, be sure to detail your operations and be honest about the most common risks with your broker. That way you will be able to know what are the appropriate coverages to protect the cash of the company that you took so long to build.
#3: Customers Won’t Work With You
If you operate as a contractor or subcontractor, insurance is mandatory not only by state laws, but also by market laws. Contracting clients often require you to have some sort of Professional Liabilty or E&O coverage, and this needs a certificate to prove it. Another insurance that can be requested is Surety Bonds .
In other words, operating without insurance is not operating most of the time. If you do maintenance services, such as general services , painting , gardening , or even construction , insurance is essential, including for issuing permits.
#4: Problems with rental contracts
If your company’s headquarters are in a rental property, you might think it’s not your duty to have General Liability or Personal Property coverage , but that’s not quite there.
While you don’t need building coverage, it’s a good idea to have insurance for its contents, after all, machinery, appliances, office furniture, your computers, and all your paperwork are valuable business assets.
Also, many landlords require their commercial tenants to have at least one of these policies, others charge for both. Otherwise, you may not be able to rent the space.
What’s more, if the building is already leased, and you haven’t renewed the required insurance, you’re violating your lease agreement and may be fined and not refunded your deposit.
Even if you manage to dodge all the above troubles, resist the lawsuits and get through time without major troubles, what are your plans for natural disasters? Or for theft? Or even a demonstration that approaches your establishment?
A quarter to a third of all businesses fail to reopen after a hurricane, tornado or other major storm, this is due to two factors: the damage caused by the incident and the lack of cash going into the cash register while the business has to close to the repairs.
How to distance yourself from this statistic? You can have a specific policy for the most likely natural disaster(s) in your region and have a commercial insurance package that includes Business Income coverage . That way you are protected from the forces of nature and ensure the livelihood and maintenance of your business and your team.
#6: Losing money on something unforeseen
As you can see, not everything is joy and freedom in the world of entrepreneurship. There are so many ways to lose money that we have no idea, and we only realize the hole we get in when it’s hard to recover.
Even if the previous struggles seem far from your reality, there are still other areas that you should pay attention to before discarding a more complete insurance package. Cases such as contract and employment disputes, alleged sexual or moral harassment, unfair contract termination, product recalls and theft are costly and far more common than it might seem. Without insurance, all charges will come straight out of your pocket.