Most small business owners consider themselves to be risk takers. But taking too many risks can be costly – especially if you don’t know what threats could harm a small business.
As a small business owner positioned for growth, you should be aware of the most common risks facing your business so that you can be better prepared when they come your way. Here are five risks that could harm your small business, along with different ways that business insurance can help you protect your hard-earned efforts.
5 common small businesses risks
1. Liability risks
No matter what you do, you’re likely to incur a loss during your business’s lifetime. Unfortunately, there isn’t a full-proof safety net around liability, but there is protection. Commercial General Liability (CGL) insurance provides coverage for damages that your business may be found to be legally liable for, which are typically caused by bodily injury or property damage to third parties, including when you and your staff are conducting business off-site. For example, accidentally damaging a customer’s property could put a dent in both your wallet and your reputation. Having the right CGL insurance coverage in place can help you protect your business in these scenarios.
2. Property risks
If you run your business from a storefront, a workshop, or an office, certain hazards could go undetected and impact your property unexpectedly. For example, a faulty outlet could cause a sudden electrical fire that could damage your equipment, inventory, furniture, electronics, and other essential items. Repair costs and replacement costs for these items can pile up quickly, leaving you in a tough situation. Commercial property insurance can alleviate your stress in these scenarios and can help pay for repair and replacement costs, so you can focus on running your business.
Many small businesses operate from a home office, and a home is often one of the biggest assets a small business owner owns. If you’re a small business owner with home insurance, know that most homeowners’ insurance policies don’t automatically cover business-related damages or losses that occur in a home office. You’ll need to get home-based business insurance to protect yourself against any business-related claims, such as slip and fall and theft. Conduct an audit of your assets to see how a loss might affect your business, and to assess what type of coverage you’ll need to repair your property and replace your possessions.
3. Business interruption risks
Many sudden scenarios could have long-lasting effects on your business. An unexpected fire or storm could cause extensive damage to your business property and force you to temporarily close for repairs. Or if one of your suppliers were to face their own business interruption after experiencing something like an electrical fire, your business would ultimately face supply delays too.
If you had to temporarily close your business, would your business be able to survive? In many cases, temporary closures become permanent. If your business income has been interrupted or drastically reduced, ongoing business expenses can pile up like quicksand.
Business interruption insurance can help you stay out of the quicksand. This coverage can help you cover operating expenses and lost income while your business is temporarily closed for repairs. Having business interruption insurance is a valuable asset for protecting your business against the unexpected.
4. Cyber security risks
The best companies today can afford the best defences. As these larger enterprises get better at defending against cybercrime, cybercriminals are moving down the business food chain and targeting small businesses who cannot afford sophisticated security investments. Today, small businesses are the preferred targets for cybercriminals. When cash flow is limited, spending on security suffers and their vulnerability increases. Obtaining cyber risk and data breach insurance coverage, as well as taking preventative measures to reduce Internet-based exposures, can help you reduce the risk of becoming a target for cybercriminals.
5. Legal risks
Many first-time business owners may not have the expertise to evaluate every detail of each contract they have to sign or they may overlook something by mistake. These oversights, however, can lead to problems down the road. Legal expense insurance can save you from accepting additional risks from suppliers or customers. It covers you against the potential costs of legal action brought by or against your business. This simple decision can save you money in the long haul – both in legal fees as well as insurance coverage.
Insurance is a key component of every business plan. By understanding these small business risks, you can take steps early on to manage the above risks and protect your property and possessions when disaster strikes.
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information. Terms, conditions and exclusions apply to coverage. See policy for details.