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.
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.
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.
K.A. Francis is a freelance writer with over 15 years experience,
and a small business consultant and jewelry designer. She holds a
Bachelor of Arts in English and business administration and a Master of
Arts. She has written for "The Einkwell," "Windsor Parent," MomsOnline,
Writer's Stew, Lighthouse Venture Group and others. Her jewelry design
company, KAF Creations, has been in operation since 1998.
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