Role of Insurance in Business
- Insurance coverage is a necessity for protecting businesses and individuals from the unexpected. Most business owners anticipate at some point that there will be losses. Insurance helps to minimize those loses. When the business does experience a loss, the insurance compensates the business so that it can continue to pursue its daily operations. The insurance company promises to reimburse the business for any damages and losses agreed upon in the contract as long as the business pays an annual or monthly fee to the insurer. Financial experts call this contingent capital. It's similar to putting money away into a savings account for a rainy day. The difference is that this type of capital may never be used by the business or has the potential to be significantly greater than the amount the business has actually deposited when it is used.
- Business Insurance Now, a web-based e-agency, supports the philosophy that business insurance developed because economic systems during the times of the British Empire were becoming too complex for business owners to count on family, friends and other merchants if something went wrong. They report that "the first more formalized instance of what can be considered insurance occurred when British merchants decided to finance some of the more dangerous voyages overseas." These trips were underwritten by business owners to protect the losses they could incur if the ship capsized or never returned. These practice became more common.
As the industry grew, underwriters needed sales professional to sell the services to business owners. Consequently, in 1667 after a major fire ruined scores of businesses and residents in London, the modern insurance company was formed. Nicholas Barbon saw an opening in the market and started "the Fire Office." The industry grew to include more and more specialized coverages into what modern society knows as insurance companies. - Liability insurance is often required by state governments, depending on the business industry. It protects business owners from losing everything if they are sued. If a shopper slips and hurts themselves in a retail store, the owner could be protected from the financial hardships that a lawsuit from that shopper could impose on his business by having liability insurance. Liability insurance also can protect business owners from infringement of a person's or company's intellectual properties. Liability insurance does not stop the plaintiff from suing in a lawsuit or receiving payment. It gives the insured the option to share the burden of the financial damages with the insurance company.
- Employers are responsible for the safety of their employees. Workers' Compensation is a form of liability insurance that protects the business owner and the employee. When an employee is hurt on the job, the owner is at risk of being sued for large sums. Workers compensation insurance can offset the burden of the owner's financial responsibility. Claire Lee Reiss, Peri's deputy executive director and general counsel, says "Businesses also suffer financially when their employees cannot (or will not) come to work after a disaster." Business owners can protect themselves with insurance coverage that will pay for loss of productivity as well.
- Business owners can protect the property that the business owns and the property she owns personally through insurance. In the event of a lawsuit, an owner's personal property may be at stake to honor the settlement agreement. Various property protection insurances are available to protect the owner from enduring this occurrence. Also, a business that owns motor vehicles or leases similar property also needs to protect these investments in case of damage or theft. A leaseholder may offer insurance coverage, but a business owner should have his own policy coverage in place as well to fall back on.
- Insurance can cover the business if their is a sudden departure of one or more of the owners. ING financial recommends that business owners purchase life insurance policies on the owners of the business. These types of coverage ensure that the heirs of the owner, in the event of an untimely death or disability, will continue to receive financial benefits from the company. It protects the interest of the business owner's family and makes settling the estate of the owner easier for all the parties involved. The business succession plan is set before the owner leaves the company, so all parties involved are able to honor her wishes as she would have wanted.