Insurance for Businesses: Uses & Importance

Instructor: LeRon Haire
The lesson will discuss why insurance for businesses should be considered a necessity. We'll also talk about various types of business insurances, such as property insurance, liability insurance, and worker's compensation.

The Need for Business Insurance

Imagine that you are driving down the street in your car, your driver's side tire runs over a nail, and you now have a flat tire. When you pull over to grab the spare, you realize that the spare is missing. What will you do, and how will you get home? Without having a spare tire, you run the risk of being caught somewhere without it when you need it most. The same can be said for businesses that operate without insurance.

A business having insurance is part of a sound financial strategy because insurance can protect the business from situations that could potentially cause it to lose large sums of money, and even possibly close. Let's take a look at some of the types of insurance that help businesses maintain a sound financial strategy, including property insurance, liability insurance, and worker's compensation.

Property Insurance

Property insurance is a type of insurance that is in place to protect against the types of losses that can financially put a business at great risk. Some of the most common types of property insurances include protection against thefts like burglaries, theft from employees, and even fraud. Property insurance can also protect against physical damages, such those related to severe weather, fires, and vandalism. It is of great importance for businesses to take advantage of the opportunity to acquire property insurance in order to maintain a strong financial strategy.

For example, let's assume that a restaurant is completely destroyed by a fire, including all types of equipment. Without property insurance, the restaurant runs a high financial risk of losing a significant amount of business if they are unable to replace the equipment in a timely manner. The ultimate loss would be the entire loss of the business, either due to the fire itself or because the business is unable to recover from it.

Legal Liability Insurance

Businesses looking to use insurance as a part of a strong financial strategy should also seek to purchase liability insurance. Liability insurance is insurance used to protect a business against legal issues. This type of insurance is typically available in two types: general liability and product liability.

General liability refers to the type of insurance that covers general things such as employee or customer injuries that have occurred at the business. General liability typically involves an injury or problem that happens due in part to negligence from the business. An example of general liability is when a person in a store slips and falls on a wet spot on the floor that is the result of a leak in the ceiling.

Product liability refers to insurance that covers issues that are related to unsatisfactory products or services. One example of product liability would be a new electronic robot that turns out to be defective and catches fire any time that it is turned on.

Purchasing legal liability insurance is extremely sound financial strategy, and can save a business thousands or even millions of dollars, depending on the type of situation at hand.

Workers' Compensation

Workers compensation insurance is especially beneficial for dangerous jobs.

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