What Can Happen When Your Company Doesn’t Have Business Insurance?
As a small business, you’re often operating with a budget of equal size. So, when your resources are limited, you look for areas to cut costs – your insurance coverage seems like one place to start. After all, you might think, your risks don’t appear to be that significant.
But, what happens when a client is not only dissatisfied with your work, but files a lawsuit stating you didn’t live up to the terms of your contract? Or when you think you’re taking safety precautions, but a visitor slips on the pavement and sustains an injury because the sidewalks weren’t properly cleared after a snowstorm? In these seemingly minor instances, insurance proves to be essential, offering you a financial lifeline to not only pay off the costs of these emergencies, but to also keep the business operating.
What can happen when your company is not properly insured? Consider the following scenarios.
- Fines and Jail Time: Lacking certain types of coverage, including workers’ compensation and even professional liability coverage, violates state laws and, in many instances, is considered a felony. As a result, you may face hefty fines and could spend time in jail.
- No Financial Protection: Insurance essentially serves as backup when your business is faced with an emergency, like an injured customer or a dissatisfied client. As a result of the high cost, your company could end up going bankrupt.
- Clients Won’t Work With You: If you operate as a contractor or subcontractor, the hiring client frequently requires you to have some kind of professional liability or E&O coverage. Thus, operating without this policy costs your business long term.
- Breaking a Lease: A business owner renting a space might erroneously think he or she doesn’t need general liability and property insurance. Although you might not need coverage for the building, having insurance for its contents is recommended. Furthermore, many landlords require their commercial tenants to carry one or both of these policies. If you don’t, you might not be able to rent at all or, if you’re already renting, you’re violating your lease agreement.
- Permanently Shutting Down: Even if you’re able to weather that lawsuit, what would you do if a natural disaster hit? Anywhere from a quarter to one-third of all businesses don’t re-open after a hurricane, tornado or other major storm because of two factors: The damage the incident caused and the lack of income from being closed for weeks to months at a time. In these instances, a separate flood or earthquake policy assists with recovering from the physical incident and a BOP or separate business interruption policy can sustain you and your staff until you’re back in business.
- Losing Money: It’s easy to underestimate your company’s risks, especially if you have no prior issues. Although you might think it’ll still be smooth sailing, common instances like contract and work disputes, alleged sexual harassment and wrongful termination, product recalls and theft all come at a high cost. Without insurance, you’ll be left paying for the damage out of pocket.
If you’ve been cutting your company’s insurance coverage close to state requirements, consider working with Ion Insurance for coverage that better fits your needs. To learn more, give us a call at 203.439.2815.
