Benefits of Insurance In Business

 Anyone who is going into business today must be aware that to be successful, he/she has to take risk. But what of those kinds of risk you have no control over? What do you do to at least reduce the consequences of these uncontrollable risks in business? The answer is simple! Insurance! Make sure you insure your business to take care of those uncontrollable risks that may occur in the future.
As you read on, you will learn about the type of risk your business may face and the benefits of insuring your business.

Types of Business Risks

There are many types of risks in business but the most common forms of risks include but are not limited to:

1. Legal Risks-: This is the risk of a company or its officers being sued for misconduct or negligence. A business may be accused of non-compliance with rules and regulations or standard practices which may lead to a law suit and if found guilty, it may lead to serious financial and non-financial consequences. This kind of risk is applicable to all kinds of businesses but is more prominent in businesses that deal directly with customers.
2. Physical Risks-: These are risks that act as physical threats to the existence and smooth operation of a business. For instance, fire disasters, explosions, flood, spillage etc. are typical examples of physical risks.
3. Financial Risks-: From the moment a person invests a dime into a business venture, the person undertakes a financial risk because there are probabilities that the business wouldn’t do well and this may lead to a loss of investment. Also, in the course of running the business, some things may occur that would cause the business to lose some money and if not properly guarded against and managed, this may lead to the death of the business.
4. Intellectual Property Risks-: This risk arises as a result of a company not taking sufficient steps to protect its intellectual property and inventions and as a result, it gets stolen and leads to a loss for the business.
5. Economic Risks-: Remember the 2008/2009 Global Economic Meltdown and how it affected companies with many of them closing down? That’s a typical example of how economic factors can affect a business.
6. Inherent Risks-: Inherent risks have to do with the nature of a business.
7. Credit Risks-: This involves the debtors of a business and the probability that they wouldn’t pay their debts at the end of day leading to financial losses by the company.
8. Market Risks-: This has to do with changing market conditions, buying patterns and changes in demands and trends that may affect the sales and profitability of a business.

Benefits of Insurance in Business Risk management

1. Prevents And Minimizes Financial Losses-: Insurance helps you to reduce financial losses when unfortunate events occur. For instance, when there is a breakdown of equipment your company might not be able to function properly and this might lead to a loss of revenue but you can use a business interruption insurance policy to guide against this such that the insurance company covers for any losses incurred during the period.
2. Promotes Continuity Of Business-: When some companies are hit with sudden and unplanned unfortunate occurrences, it may lead to the end of it if not properly managed but insurance helps to minimize risks so that the business continues to operate and grow regardless.
3. Risk Sharing-: Insurance also helps to achieve risk or loss sharing in business. Such that when a company makes losses instead of profits, the insurance company can come to the rescue. Also, when businesses are hit with misfortunes, they may not be able to solely afford the costs of getting back up and running again but when the business is insured, the risks are shared between the company and in the insurance company such that both parties can collectively get the business up and running again.
4. Protects Business Image-: When a business goes down, it is not only the business that suffers; the customers, stakeholders, shareholders and the public are affected too. Therefore, insurance helps to manage bad occurrences so that customers and every other person attached to the business can be protected.
5. Protects The Business Against Debtors-: Sometimes, debtors also pose risks to the business and insurance can help to protect the business against defaulters.
6. Effective Use Of Resources-: Insurance also helps to promote and ensure that resources are put to the best use. For instance, health insurance helps to ensure that employees are of perfect health and happy so that they can put in their best. Happy and healthy employees equals positive output.
7. Provides Assurance To Stakeholders And Investors-: Also, when a company is insured, it provides a kind of assurance to people who may consider doing business with them. Insuring your company attracts shareholders and customers to your business.

CONCLUSION

The benefits of insurance to your business is limitless and boundless, so, you would be doing yourself a whole lot of good by insuring your business.