Even the most adventurous and courageous entrepreneurs think about the possibility of some risks. In this case, the excitement multiplies many times if a person is engaged in the business of his whole life. In this article we will consider what is business insurance, as well as its main varieties.
How did this concept come about?
To begin with, it’s worth understanding what the essence of a market economy is. This concept means the relationship between various economic entities. This may include the state itself, as well as its citizens. Moreover, market relations are the sale of certain goods and services, where some entities turn out to be sellers, while others are buyers.
In the process of such interaction there is fierce competition. Therefore, in order to maintain their capabilities in the market, entities begin to act quite risky. It is precisely due to the presence of such risks that an industry such as business insurance has appeared. This type of activity can provide significant assistance in reducing possible economic risks.
Of course, independent business is a rather complicated and responsible process, where each businessman bears full responsibility for his property. Business insurance will help protect individuals from the possible risks of failure. However, it is worth considering that, like conducting your business, insurance will require certain financial expenses from you.
The main reasons for the decline in profitability
Of course, creating your own company is not an easy task, but it is even more difficult to ensure its prosperity for many years. Whether it is too late any, even the most demanded and perspective business, can fail. Consider the main reasons why this can happen:
- changes in tax legislation, as well as depreciation of the currency;
- fires, accidents and natural disasters;
- the introduction of new laws restricting the conduct of certain activities;
- making mistakes by company employees (human factor);
- Violations in the economic situation of the country can be the main reason for the decline in demand;
- loss of the main specialists of the organization.
No one is able to accurately predict the main reasons why an enterprise may go broke or lose big capital. But in order to minimize the above risks, you need to pay attention to a service such as business insurance.
Risks and insurance in a business plan
Given the negative risks in the business plan, you can greatly facilitate your work, and save a large amount of funds. Of course, it is absolutely impossible to predict all the risks associated with your type of activity, but it is very possible to reduce them to a minimum number. To do this, you need to make an analysis of the risks in your business plan, and be sure to consider how to reduce them. Whatever you do, be sure to develop a business plan. Insurance will help you avoid negative consequences.
Small and medium businesses
Bankruptcy of a company occurs when its owner can do nothing else to reanimate it. Small business insurance is a very reliable and sure way not to lose all the money as a result of closing your organization.
After receiving insurance payment, you will have another opportunity to reanimate your business or to start something new again. This way of dealing with risks is very effective in activities related to the provision of services or the sale of goods on credit and by installments.
Most often, business insurance includes the following items: property, liability and business break insurance.
Property insurance
Imagine that you started a new business. To do this, you will need to rent or buy premises, equipment, furniture and other items. All property purchased or rented by you can be stolen or damaged. So with the help of property insurance you can return all the money you have wasted. However, note: for this type of insurance you need to provide the exact cost of all purchased or rented goods to the insurance company.
Having drawn up an insurance contract, you will be able to protect the premises, property, goods, office equipment, equipment, as well as money lying in a safe or at the box office.
In this case, the cost of insurance is calculated purely individually.
Liability Insurance
Such insurance can protect you in the event that your organization has caused harm to the customer or if he has complaints about your goods and services.
To accurately understand the meaning of this type of insurance, consider an example. For example, you own a hairdresser. A master who works for you has inadvertently harmed the health of your client and he is demanding compensation from you. If you do not have the opportunity to pay it, then the insurance company will come to the rescue.
Work Break Insurance
During the operation of each enterprise, an unplanned break may occur. Of course, such breaks as holidays or vacation of employees can be foreseen, but what to do in case of force majeure circumstances? For example, if a fire occurs in your plant?
All types of work will be suspended, so you have to spend money on restoration, compensation for damage, and you also need to pay salaries to employees, taxes and so on. In this case, business interruption insurance can cover all your unplanned expenses.
Insurance and business valuation
An assessment for insurance is needed to make the correct calculation of insurance premiums.
Every modern insurance company should have a very clear and objective idea of the value of insurance property. An independent insurance assessment allows specialists to quickly assess all risks and create an insurance portfolio.
Typically, insurance companies turn to third parties who engage in such calculations, and based on the data received, put forward their conditions for insurance.
Useful tips from insurance brokers
Business insurance (Sberbank also provides this service) must be carried out correctly.
Consider a few important tips that can help you when choosing an insurance company:
- You should not insure your favorite business immediately “from everything”. First of all, analyze your type of activity well and consider the maximum possible risks. Only then contact the insurance company. This will help you not only correctly calculate your funds, but also conclude the correct and important contract.
- Approach your choice of insurance company consciously. Of course, there are thousands of them in the modern market. Take no chances and choose only time-tested organizations.
- Pay as much attention to the insurance contract as possible. Fully study this document, because very often insurance companies leave a “hook”, which you can then catch on. And believe me, it will not be in your favor.
Managing your own business is a very difficult and responsible task. It is very difficult to predict where the negative risks await us. Therefore, it is always better to play it safe. This will help you protect yourself from unplanned expenses or even bankruptcy. Good luck in your endeavors.