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Business Insurance

Business insurance is a risk management tool that enables businesses to  transfer the risk of a loss to an insurance company. By paying a relatively  small premium to the insurance company, the business can protect itself against  the possibility of sustaining a much larger financial loss. All businesses need  to insure against risks—such as fire, theft, natural disaster, legal liability,  automobile accidents, and the death or disability of key employees—but it is  especially important for small businesses. Oftentimes, the life savings of the  small business owner are tied up in the company, so the owner must take steps to  protect his or her family from the financial consequences of events that could disrupt operations, reduce  profits, or even cause the business to go bankrupt.  Insurance can help a small business be successful by reducing the uncertainties  under which it operates. It places the economic burden of risk elsewhere so that  managers can focus their attention on running the business. In addition, the  premiums paid for many types of insurance are considered tax deductible business expenses.

Many large corporations employ a full-time risk management expert to identify  and develop strategies to deal with the risks faced by the firm, but small  business owners usually must take responsibility for risk management themselves.  Though it is possible to avoid, reduce, or assume some risks, very few companies  can afford to protect themselves fully without purchasing insurance. Yet many  small businesses are either underinsured or uninsured.