Starting a business is no small endeavor and needless to say, you probably have a sizeable investment in your new company. Before launching, it is vital to understand that no one is going to be there to protect you against losses, so all the right insurance coverages should be in place from day one. However, as important as it is, money is just the beginning of the losses you could sustain without adequate protection. If there is one thing you can be sure of when launching your new startup it would be that you must invest in insurance. Here are just a few of the reasons why.
Protections Under General and Product Liability Insurance
If your budget is already stretched, the one basic type of commercial insurance you cannot afford to be without is general liability insurance. This coverage protects your company against a lawsuit, should a customer claim that your product or services resulted in injuries. Some lawsuits can put you out of business, so the cost of insurance is negligible compared to the tens of thousands a customer can be awarded if you are found responsible for those injuries.
With general liability insurance, your startup is protected against bodily injury and/or property damage and, as you have seen in the news more times than you care to count, juries are quick to award copious amounts of money to those who really didn’t sustain the severe losses they were claiming. Take into consideration the famous McDonald’s coffee claim and the customer who was awarded millions because she placed her own coffee on her own lap and was burned when she spilled it. In a rational world, who would even think of suing a restaurant for serving hot coffee? This woman did, and she won with the jury, but the judge thankfully toned the damages down to a more realistic sum.
In addition to general and product liability insurance, if your company hires contractors to complete work on your behalf, you should ensure that they carry tailored contractors insurance for the job they are doing. Whether you run a handyman firm, a plumbing company, or even a landscaping business, having contractors with insurance is vital. This will ensure your firm is protected should anything go wrong.
Negative Press Could Be Your Ruin
While injuries and property damage could result in you paying out hefty sums, that is just one of your worries. It all boils down to money, but sometimes the ultimate loss isn’t what you’d imagine. That sum paid is just the beginning of what those damages can cost you and perhaps the worst nightmare is all the negative press you’ll receive if a customer wants to take the matter public.
It may be possible to bounce back after paying any compensation and legal fees, but it may not be possible to avoid the loss of business due to a public claim of bodily injury or property damage your company is alleged to be responsible for. This is why a great number of times the case will be settled out of court. Negative publicity can be the ruin of a company, and at the very least, can cost a sizeable sum for reputation management services.
Time Is Money So Don’t Lose Any!
Then there is such a thing as business interruption insurance. If you live in an area that is prone to natural disasters, this may be a type of coverage you really need to consider. Business interruption insurance covers you for lost revenue due to a disaster that keeps you from operating your business. This coverage pays for lost revenue while you are closed to make repairs or move your location. Based on average earnings, you would be compensated by your insurance company for the length of time you are closed due to repairs or relocation, up to the prespecified amount you are covered for.
Other Losses You Can Sustain
Have you considered what you would do if one of your main pieces of manufacturing equipment suddenly stopped working? What if you were no longer under the manufacturer’s warranty and had to replace the entire machine? Could you afford to buy a new one? Also, what about fire, flood, theft, and vandalism? Could you repair or replace anything that was destroyed or stolen? Yes, money is always the bottom line, but what if you were in the process of putting together a large order from your main client? Would they be patient while you repaired or replaced the items that are no longer operable?
It may sound a bit cliché at this point, but it really is always better to be safe than sorry. Insurance is there to protect you against losses large and small so that your startup doesn’t go bankrupt in the process. No company can continue to operate at a loss and so you should always get the best coverage you can afford. It may be a matter of the life and death of your business and this is something you can’t afford to ignore. You’ve come this far, why lose it all before you can even begin realizing a profit? Insurance can make the difference between total loss and success.