The rewards of small business ownership can come with their share of risks. Some accidents or theft, for example, can lead to lost revenue, legal liabilities and big headaches. Fortunately, you can help protect your company by identifying potential risks and taking steps to prepare for them. Here’s a look at five business risks and how you can help minimize the consequences.
Risk #1: Damage to your business or its contents
What would happen if your business’s property — its physical location and its contents — were damaged or destroyed by fire or a natural disaster? Could you afford to make repairs or rebuild?
- How to prepare your business: Talk to your insurance agent about buying a business owners insurance policy to help protect your business. The property coverage in a business owners policy may help pay to repair your business’s physical location if it’s damaged by a covered event, such as a fire. The property coverage also helps pay to replace business belongings that are stolen or damaged by a covered event. Additionally, you may want to consider creating an inventory of your company’s property, such as furniture and office supplies, so you have a record of items at your business.
Risk #2: Business interruption
Many small business owners don’t think about what they’d do if a disaster, such as a tornado or fire, makes their business location uninhabitable, says the Insurance Information Institute (III). It’s important to have a plan in place in case you’re forced to temporarily relocate or close while repairs are made.
- How to prepare your business: Consider purchasing business interruption insurance, which is typically part of a business owners insurance policy. Business interruption coverage may help replace lost business income or pay for extra expenses (such as rent for a temporary location) if a covered event damages your business’s physical location. Covered events typically include fire, wind, lightning, theft or falling objects.
Risk #3: Injuries at your business
If a customer or visitor is injured at your business, and you’re found liable, your business could be on the hook for court costs, medical expenses or legal fees.
- How to prepare your business: Consider commercial general liability (CGL) coverage for your business. This type of liability coverage is also typically included in a business owners insurance policy, and may help protect you in the event someone is injured at your business. For example, if an employee accidentally hurts someone else while performing their work, this coverage offers protection for related lawsuits. It may also help pay for the injured party’s medical expenses or the business’s court costs or legal fees.
Risk #4: Professional liability
If your business provides services or advice to clients, your company may face the risk of lawsuits stemming from things like alleged negligence or providing inaccurate advice.
- How to prepare your business: You may want to consider investing in professional liability insurance, sometimes referred to as errors and omissions insurance or even miscellaneous professional liability. If a client holds you responsible for any losses they incurred based on the advice or services that your business supplied, this coverage may help protect you. It may also help cover legal fees or other costs stemming from judgments or settlements against you.
Risk #5: Data breaches
In today’s digital world, businesses may be at risk for having their company data stolen.
- How to prepare your business: Consider investing time and resources into securing networks, using firewall software and encrypting data, recommends the Federal Communications Commission. Also, take time to train employees on information security and require password protection on all accounts to help protect the company’s data. Additionally, you may want to consider adding data compromise coverage to your business insurance policy. Data compromise coverage, sometimes called data breach liability insurance, can help your business recover after a data breach. It helps pay for things like legal fees or credit monitoring for customers, if needed.
Having the right insurance coverage can help protect your company against common business risks. If you have questions about what kind of coverage is right for your business, consider contacting a local agent for help.