Unlike going to the store and bringing back a bag of groceries, buying insurance is buying a promise. This promise is an assurance that if something bad happens to your business, home or other assets, the company that sold /you the promise will pay you back your loses. Taking insurance for your business is basically transferring the risk to someone else and leaving you with a safety net for new chances of recovery and growth.
Below are some 7 reasons showing the importance of insurance.
1. Continuity of trade
A case study of the 9/11 attack brought to life the question of if the attack was an act of war which is usually not covered, but fortunately, businesses were compensated for the losses associated with the attack. There were some insurance companies that wanted to segregate terrorism as un-insurable after this attack, but the federal government intervened and asked for such a cover to be included for the sake of continuing trade. Due to this move, many companies and businesses were encouraged to carry on with terrorist-targeted businesses like chemical transporters and processing plant.
2. Insurance for lenders
When you approach a financial institution for a loan or mortgage, they need to know that your business is insured and will continue trading so that you can repay back the money they lend you to either start off a business or expand an already existing one.
3. Some states have made insurance mandatory
In some places, taking up insurance is just an act of a law abiding citizen. Automobile insurance is a god example of mandatory insurance throughout the world. Another example of compulsory insurance is the worker’s compensation which required for many businesses in most states.
4. You enjoy peace of mind with insurance
The peace of mind that comes with insurance is invaluable. Businesses can expand and explore various avenues and opportunities for growth without taking on the full risk.
5. Families and businesses are stabilized thanks to insurance
Families feel the loss of a loved one upon their death but they have a safe financial landing if they had taken out life insurance. Businesses continue with their core activities even when faced with liabilities, threats or losses. In both the business world and family set up, the policyholders can face life with better resolve thanks to the stability they get from insurance.
6. Small people are protected by insurance
Every industry has the big businesses and the small businesses. The big businesses in the industry can take a hit in the event that something goes wrong but the small ones will be shaken and face the risk of falling off. The big shots in the industry can turn into monopolists by buying off the small businesses, but thanks to insurance, the small establishments have support to hold on and survive the hit.
Insurance therefore plays a role of preventing monopolies from being formed which can ruin certain industries.
7. You can never go wrong with insurance
A god example of this is the recent tragedy of an explosion at the West Fertilizer Co. in Texas. The damage was estimated at 100 million pounds whereby the community, schools and hospitals were affected. The company only had 1 million pounds in general liability insurance and the city has taken the company to court for compensation and the chances are the remaining assets and property for the company that were not ruined in the explosion will be lost in this law suit. Had the company taken out proper insurance for the possible risk their operations posed, they would have been in a position to compensate the city for the losses.