Entrepreneurs are exposed to risks from the moment they start a business. A business is vulnerable even before it hires its first employee.Insurance risk is the chance that something could go wrong, exposing your company or the insurer to financial damage. Insurance risk and business risk often overlap.
Understanding the various types of business risks will help you better understand how business insurance can protect your company from serious financial problems.A single lawsuit or catastrophe could wipe out a small business before it has any chance of survival. Businesses have access to many insurance options to help protect themselves against these risks.
Types of Business Risks and their Solution
Property Risks
Your business’s most valuable asset is often your property, such as buildings, vehicles, and inventory. Your business’s operations can be affected by potential damage to your property. A faulty wiring could cause an unplanned electrical fire, causing damage to your building and equipment.
It can be costly to repair or replace your property quickly. This could leave you in a difficult spot and make it impossible for your business to continue its operations. Many small business owners work from their home offices. Business-related damage is not covered by most homeowners insurance policies.
Solution:
To help protect your company, talk to your broker for business insurance. If your business is damaged by an insured event such as a fire, the property coverage may pay for repairs.
The property coverage can also pay for the replacement of business belongings damaged or stolen by covered events. You might also want to create an inventory of all your company’s property (such as furniture or office supplies) so that you can keep track of what is at your business.
Business Interruption Risks
Unexpected events, like fires and natural disasters, can force you to temporarily halt operations. Even if you had the money to pay for the damage yourself, it might take some time to get your business back on track.
If your business was shut down for several months, or even weeks, would you be able to survive? These types of situations are common and many companies do not reopen. It is important to have the right insurance to protect your business from unexpected events. Read more about Commercial Insurance in Ontario and the risks involved.
Solution:
You can consider buying business disruption insurance which is usually part of a business insurance policy. If your business is damaged by an event that covers business interruption, it may be able to pay extra expenses or replace lost income. Fire, wind, lightning, and theft are all covered events.
Technology Risks
Cybercriminals are trying to take advantage of technological advancements and embrace technology more than we do. Cybercriminals find new ways to launch data breaches and identity theft as well as financial fraud through online scams and malware, phishing attacks, and the like. Technological risks can have serious consequences for your business’s reputation and operations. If data is lost, they can bring you heavy financial penalties and expensive litigation. Businesses must embrace threat detection and security software to prevent these risks from causing harm.
Solution:
You can invest time and resources in securing networks and using firewall software to encrypt data. To help protect company data, make sure employees are trained on information security. You might also consider adding Data Compromise coverage to business insurance.
Data breach coverage is sometimes called insurance for data compromise. It can help your company recover from a data breach. If necessary, it can pay legal fees and credit monitoring for customers.
The right insurance coverage can protect your business against common risks. For help in deciding the right coverage for your company, contact a business insurance broker.
Reputation Risks
Every business is at risk of having unhappy customers, negative press, lawsuits and other events that might damage its reputation. Bad news can spread quickly via social media and the internet, increasing the reputational risk.
Companies must be aware of their digital footprint to better manage the risk and be prepared to react to any negative actions that occur. It is important to communicate to the public that you are aware of the situation and that you are working to improve your product or business.
Solution:
Professional liability insurance, also known as errors & omissions insurance, covers businesses against claims of negligence due to damage that results from either mistakes or failures to perform in addition to claims of slander and defamation.
Professional liability insurance is not a one-size-fits-all policy. Every industry has its own concerns, and a custom policy will be written to address them.
