While every business owner recognizes the need for business insurance, not everybody understands the basic principles of this type of insurance. Commercial insurance can be complicated, and businesspersons can easily incur huge loses for their ignorance. Understanding the tenets of commercial insurance is necessary if business owners are to get financial security. In that regard, it is important to understand the following myths many people hold about business insurance.
Some industries do not require insurance
Some people believe that their businesses do not require insurance, but the reality is that all businesses should be insured. This confusion is rife in industries without mandatory commercial insurance. Insurance should be part of the overall risk management plan, even if it is not demanded by state or national rules and regulations. When a business makes a loss (irrespective of the origin of the loss), there are different business insurance policies that can help it get back on its feet. The small monthly premiums help in boosting confidences for taking calculated risks, and it is these risks that enable firms to grow.
A business that does not make a lot of money cannot be sued
This is another misconception that many business owners hold. They think that just because they do not make super-profits, they do not need insurance because nobody will sue them. This misconception has been fueled by the rising number of cases involving big corporations being sued for millions of dollars. This is a misconception because suits can arise even out of seemingly frivolous issues, and once a suit is lost, there are numerous ways of collecting the settlement. For firms that lack adequate cash, equipment can be seized and business accounts can be frozen. All these actions that can cripple a business can easily be avoided by insurance.
A firm with one employee (or part time ones) does not need employer’s liability cover
Sometimes, it seems as if small businesses that are reluctant to insure their operations are the ones who need insurance the most. For example, some people believe that if they only employ one person, they do not need employer’s liability. There are also those who think that they do not need insurance if they only have part time employee. Both of these beliefs are myths. In the first case, it is easy to get fined for not having employer’s liability even if the single employee is a member of family of the employer. Secondly, every employee should be covered, even if he/she works for only one hour each week.
Insurers do not have the money to settle all claims
This is a myth held by those who think that they should not insure their businesses because insurance companies may not be able to pay them in case the insured risks do occur. Such people should be told that all insurance firms have coverage limits, and they cannot have limits higher than their assets. There is also coinsurance, which is useful for very big risks. Finally, there are reinsurance companies responsible for insuring insurance firms. All these checks and balances ensure that claims rising for all insured risks can be paid.
Once the business is insured, everything is covered
Though many people will not admit subscribing to this belief, it often arises during disputes with insurance companies. The reality is that business insurance policies only cover specific risks, just as is the case with other forms of insurance. Every business owner needs to scrutinize a policy before signing on the dotted line. The problem is that people rarely read policies in their entirety, only realizing that their claims are were not covered when something happens. The exclusion section of each policy is clear on what is not covered, and reading this section will prevent many misunderstandings. If you want more information, or a business insurance quote, give Breathe Easy Insurance a call at 866.822.7755.