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Why Do Businesses Need Business Insurance?
With over 200 years of experience, people often ask us, "Why do businesses require insurance?" The simple answer is because accidents can happen at any time. And when they do, business insurance helps pay for damages you’d otherwise have to cover out of pocket.
Business insurance coverage helps:
- Save you time, money and stress.
- Protect your business from damages.
- Provide benefits to your employees.
Why Is It Important To Have Insurance?
Business insurance is essential to the success of your company. Insurance can help cover the costs of property damage, legal fees and even help with lost income during difficult times. When you have the right types of coverage, you can focus on running and growing your business.
Business owners face risks everyday as part of normal operations. So, it's important to have protection. While there are many reasons to have insurance, the top 10 reasons for insurance coverage are:
1. Certain Types of Business Insurance Is Required by Law
States may require certain types of business insurance coverage. For example, most states require you to carry commercial auto insurance if you drive business-owned vehicles for work.
Even if your business doesn't need to carry a certain type of coverage, it can still be helpful to have. The benefits of insurance could protect you from financial loss and can help you if:
- A customer sues you after getting hurt at your place of business.
- A fire destroys your building or inventory.
- Someone steals a client's computer with their personal information on it.
- Your employee gets into an accident while making a delivery.
2. Business Insurance Protects Your Employees
One business insurance coverage that most states require is workers' compensation insurance. It gives your employees benefits if they have a work-related injury or illness. This type of insurance can help cover:
- Medical bills
- Missed wages
- Funeral benefits
Workers' compensation benefits can help your employees recover and return to work. Be aware that workers’ compensation offers different protection than unemployment insurance programs.1
3. Business Insurance Protects You From Everyday Risks
Many small business owners start with a Business Owner’s Policy (BOP) as a foundation for their protection. It combines general liability, business property and business income insurance into one convenient policy.
A BOP can help protect your business from property damage and claims that it caused bodily injury or damaged someone else's property. It can also help replace your lost income if you can't operate because of covered property loss.
4. Business Insurance Builds Credibility
Your business insurance does more than protect your business. Having the right coverage shows your customers and contractors that you're serious about managing risks. It also helps communicate to everyone that you’ll provide the right protection, no matter what accident occurs.
5. Contracts May Require Business Insurance
As you work with more customers and clients, your contracts may require you to carry business insurance. You may need coverage for:
- Renting a building from your landlord
- Borrowing money to finance goods
- Loan agreements
- Clients agreements
6. Business Insurance Can Help Recruit and Retain Employees
Employees look for more than just a salary as they search for jobs. They’re also looking for the right benefits, like life and health insurance. Businesses without insurance often miss out on attracting and retaining the best employees.
7. Business Insurance Protects Management
Your management liability insurance can help cover the owner, CEO or “key person” that runs your business from costly lawsuits. Management liability insurance can help protect those working for nonprofit organizations and publicly traded companies. You may be able to add management liability insurance coverage to your BOP.
8. Business Insurance Protects Against Natural Disasters
Most states suffer from various natural disasters, like:
- Fires
- Tornados
- Hurricanes
- Lightning
Having the right coverage, like commercial property insurance, is important to protect your business if disaster strikes.
9. Business Insurance Helps with Lawsuits
Every company can get sued and face legal fees. One of the reasons you need business insurance is to help cover your legal costs.
10. Business Insurance Offers Peace of Mind
With the right type of coverage, you can focus on operating your business. Because if the unexpected happens, you'll know you're protected.
Get a Business Insurance Quote
At The Hartford, we're an insurance company that understands the unique risks business owners in different industries face. Our specialists can help you figure out which type of small business insurance you need. Some of the industries we can help protect include:
Get a quote today and see how The Hartford can help protect you, your business and your employees.
Last Updated: October 31, 2024
1 U.S. Department of Labor, “Unemployment Insurance”
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