03/14/2018
Many business owners feel business insurance is an expense they cannot afford, or is a luxury for more established businesses. Although it is true business insurance can be expensive, it is an expense every business, regardless of the industry, size or length of time in existence, needs to include in its budget.
Catastrophic Loss
Business insurance protects a business from closing due to a catastrophic loss. Fires, floods, hurricanes and tornadoes have been the end of many businesses in Texas, as elsewhere. When a company carries insurance against these types of losses, closure and loss are only temporary instead of permanent. Companies shoule always consider business interruption insurance, a rider on their business insurance policy, to ensure continued cash flow for the duration of a closure due to a natural disaster.
Liability
If a customer slips and falls while on your business premises or your product has a defect that injures a customer and you do not have insurance, this could spell the end of your business. If a company car is involved in an accident and someone is injured, that could be disastrous as well. Business liability insurance covers accidents that occur on the business premises, product defects and mishaps that occur during normal business operations on and off premises.
Theft
A new business is a big target for thieves. New computers, furniture and other office equipment is worth more at a pawn or chop shop than older equipment. Even older businesses that have just undergone renovations and upgrades are a target. Replacement insurance protects a business in the event equipment is stolen, replacing the missing items and paying for repairs from damage caused by the invasion.
Litigation
We live in a litigious society. Even with the Texas tort reform legislation passed in 2003, which capped judgments and sought to eliminate frivolous lawsuits, businesses are sued by individuals and other businesses for a variety of reasons, legitimate and otherwise. Even the most frivolous lawsuit can be costly to defend; and in the event a business ends up on the losing end of a lawsuit, the awarded damages could exceed the business's capabilities to pay. Depending on the business entity structure, not only the business assets, but also the owner's personal assets could be at risk. Business liability insurance, malpractice insurance or professional liability insurance will cover at least part, if not all, of any damages.
Personal Injury or Illness
Business owners should have personal insurance as well. Medical insurance will ensure medical bills incurred due to an illness or injury will not wipe out a business's assets. Considering Texas has some of the highest medical costs in the country--costs per person are over 24 percent higher than the national average--going uninsured could potentially bankrupt a Texas business owner if he were to become ill.
Level of Coverage
How much insurance to carry will depend on your industry, the business structure and the amount of assets your business has. The location of the business within Texas, such as coastal or rural, and whether the building is leased or owned will also be a factor. For example, a law firm partnership that owns the building in which it is housed might need more insurance than a jewelry designer operating out of her home.
