Insurance for Businesses: What You Need to Know

As an entrepreneur, protecting your business is important. You’ve invested your time, energy, and money into creating your new enterprise, which is why it’s so imperative that you take all the necessary steps to protect it.

Regardless of its size or scale, having the right insurance can give you peace of mind, knowing that your efforts won’t be destroyed because of a disaster. This article addresses the different kinds of coverage available for your business and the advantages of each.

Why is Insurance Necessary?

If you are just starting your company, then you’re probably trying to keep costs as low as possible. Adding insurance to the mix at this point might seem premature, particularly if you don’t have a lot of available cash right now. However, consider these potential scenarios and how they could not only impact your business but your family as well.

Disability

What happens if you get injured and can’t work? If you’re the lynchpin for your enterprise (i.e., you run most of the day-to-day operations), it would be devastating if you’re not financially protected.

Also, you may have left a full-time job in order to start your own business. As a result, you might have given up an employee benefit program that included personal disability coverage. As a business owner you are particularly vulnerable to a disability in that not only may the business be in jeopardy but where would the money come from to sustain your family? Having adequate long term disability coverage and/or critical illness coverage for the benefit of both the company and your family might well be the answer.

Also, consider disability not just for yourself, but for any key employees you may have. What happens if your manager or lead staff gets hurt or sick and can’t work? How are you going to recover the profits that will most likely be lost?

Death

Although no one wants to consider the possibility of sudden death, you never know what tomorrow may bring. If you have a business loan in your name, how will that loan be repaid if you’re gone? Will your family be able to come in and take over if the worst happens? Having insurance can provide peace of mind, no matter what happens.

Natural Disasters

Mother Nature can be devastating if you’re not prepared. Floods, earthquakes, and other disasters can impact your business in a variety of ways. Even if your property is not physically damaged, what if you lose power? What if deliveries can’t get through? If disaster strikes, how will your company manage the fallout until things get back to normal?

What Insurance Do You Need?

Overall, paying for insurance is one of the smartest investments you can make. There are many different options available, so let’s break them down to see which ones are going to have the best impact on your business.

Individual Life Insurance

If you are the key person for your company, then you need life insurance. Whether you’re running all operations, or everything is under your name, being adequately insured can protect your business and your family in case the worst happens. For example, if you provided collateral for your bank loan, a death benefit can help cover that, as well as operational costs, until a replacement is found.

If you own your venture in partnership with someone else, you will want to explore life insurance to buy out each other’s business interest. Should your partner or fellow shareholder die, it is likely that you will be obligated to buy your partner’s interest from his or her estate. It is also likely that there would not be sufficient cash to accomplish this. There are also significant tax benefits in using life insurance to buy out a deceased’s shareholders interest in the company. Life insurance is often the most efficient way to fund shareholder agreements.

Disability Insurance

Many people overlook this type of insurance, but it can save you and your company if you ever do become disabled and can’t work. Life insurance alone won’t protect against disability, so it is advisable to obtain this type of coverage in addition to any other plan you have in place.

Business Overhead Insurance is another type of disability coverage that is available. This helps cover the costs of the company’s operating expenses if you’re unable to work and must find a replacement.

Key Person Insurance

If you have an employee or manager that is vital to your success, key person insurance is a smart move. This way, if that person dies or becomes disabled, the company could receive benefits that will help cover the costs of replacing him or her. You would readily insure your equipment and premises, so why not insure your most important corporate assets – you and your key personnel?

Property Insurance

This kind of policy is not only necessary, but many landlords require that you have a plan before signing a lease. Property insurance can not only protect the building itself but any equipment or other assets inside. Make sure that your policy insures against all kinds of damage, including theft or fire. Also, keep in mind that you will need a separate plan for natural disasters like flooding or earthquakes. There are also policies available that will protect profits lost due to unforeseen events.

Employee Benefits

While insurance for yourself is crucial, you should also consider providing it for your employees. Having a comprehensive employee benefit program can be an excellent incentive for new hires, ensuring that you bring on and retain the best people possible. Overall, employees are much more willing to work for a company that provides benefits, such as:

• Extended Health Insurance – having a plan that covers hospital and travel benefits, professional services such as chiropractors, therapists and massage practitioners will be most appreciated by your employees.
• Vision and Dental – this type of coverage is especially appropriate for employees with a family. The dental coverage can even be designed to include orthodontic benefits.
• Disability Insurance – government benefits and worker’s compensation don’t always provide adequately for workers.
• Retirement Planning - if most of your employees are planning on working for the long term, offering retirement plans can ensure that you retain the best of the best. While your company may not be mature enough to consider a Registered Pension Plan, matching contributions to an employee group RRSP may be the answer.
• Life Insurance - in many cases, businesses offer group plans for all of their employees. However, because these policies usually don’t allow for individual consideration you may also wish to provide the option for your employees to buy additional insurance if they wish.

Bottom Line - take insurance seriously

No matter what kind of business you’re running, having the right insurance in place can provide you with confidence and peace of mind.

As always, please feel free to share this article with anyone you think may find it of interest.