Here is another in our series of “quick overview” blogs designed to help you put things such as business insurance into a business context.
Businesses face risks
Any business faces a variety of risks, many of which might have dire financial consequences should they come to pass.
These risks can be categorised in many different ways but it sometimes helps to consider them as falling into two different categories from an insurance viewpoint:
- business operational and viability risks;
- perils-related risks.
The conceptual difference between the two is that the former are those things that the business can or should plan for via contingencies and market research etc. So, for example, a new product launch may prove to be a huge financial disappointment and even loss if the public reacts indifferently.
Businesses typically consider such risks and consequences to be part of their day-to-day risk profile.
By contrast, businesses are also at risk from the financial consequences of problems arising which they couldn’t have predicted or within reason, managed out in advance. Examples there might include:
- natural disasters;
- a personal accident affecting the business owner;
- a customer being injured on the premises and suing for compensation;
- burglary; etc.
It is this second category of peril-related risk that business insurance typically seeks to assist with.
Business risks vary
A second key concept is that of flexibility in cover.
The need for such arises from the simple fact that not all businesses face the same risks and they therefore don’t need identical cover.
For example, a hazardous materials disposal company may have a very different employee health risk profile than a town centre shoe retailer. Another example might be a warehousing business with 10 employees and therefore a legal requirement of employers’ liability insurance, versus a sole trader who employs no-one.
Business insurance must therefore be flexible and customisable to accommodate the potentially very diverse nature of what might be termed “a business”.
Breadth of cover
In order to be flexible in response to a policyholder’s unique position, business insurance also needs to be broad in terms of the individual elements of protection it provides.
Just a few of the areas that might put one type of business or another at risk include:
- buildings (whether owned or not);
- public liability (being sued for damages);
- product liability (usually associated with manufacturing something and selling it);
- employers’ liability;
- floods, fires, storms and other acts of nature, which may adversely affect buildings, stock and equipment;
- burglary and theft – affecting the same areas as outlined above;
- spoliation – that might happen if the power supply fails leading to IT equipment malfunctions or refrigeration outages leading to perishable stocks being lost;
- the loss or theft of mobile equipment including tools;
- personal accident insurance; etc.
There are many other dimensions associated with the generic term business insurance.
Could it happen to you?
An old joke in the insurance industry is that insurance is always completely unnecessary – right up until the moment you need to make a claim. At that point, it’s too late to start wondering whether or not you should put cover in place.
Businesses are at risk and yours will be likewise. Only you can decide whether or not you need to take out cover (with the legal exceptions of vehicle and employers’ liability cover) but it is something that it would be advisable to consider.
Why not contact us at Specialist4Business to find out more?