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How Small Business Owners Can Mitigate Four Common Risks


Launching and operating small business is an exhilarating experience. If you are successful, you can take the American Dream to the next level – a place where hard work yields rich rewards.

The U.S. has one of the most favorable economies in the world to start a business. Thousands of small business owners have had success and have contributed to a steadily growing economy. However, starting a business comes with plenty of risk and it’s important to know how to prepare for adversity.

In honor of National Insurance Awareness Day, which is June 28, we have outlined four of the most common risks entrepreneurs face and how insurance can help.


#1: Property and Business Interruption Risk

As a business owner, one of your first objectives is to protect your business property from a wide range of perils – from storms, falling trees and other causes of damage to theft and crime. Your business property may include many different assets including:

 Owned buildings and structures

  • Inventory and supplies
  • Equipment
  • Computers, proprietary data and cash registers

With limited financial capital available, another common risk faced by small businesses is business interruption resulting from property damage. For example, if a tree falls on your retail establishment and you are unable to open your doors while repairs are taking place, business interruption coverage would help offset your lost revenue.

You’ve invested a lot to get up and running, so be sure to protect your investment with a property insurance policy. If you have a commercial package policy, it includes property insurance coverage. Most package policies also cover business interruption resulting from a property loss. Ask your agent for details.


#2: Liability Risk

In today’s litigious society, liability risk can have a debilitating effect on small business owners. Can you imagine the stress of being sued if some aspect of your business operation caused someone physical or financial harm? Even if the accusation is false, it can cost a small fortune to defend your good name.

A commercial package policy also includes protection for some liability risks. Combining both general liability and property coverage, a package policy is an effective way to protect your small business from third-party claims that occur on your premises, like a customer slip and fall.

Be sure to ask your insurance agent if your liability coverage also safeguards against product liability if someone is harmed by product malfunction.

If you provide a service rather than selling a product, you should also have professional liability insurance, which will defend you if you are accused of making a mistake that results in someone else’s financial loss. Examples of professionals who need professional liability insurance (also known as errors and omissions insurance) include financial planners, insurance agents, marketing professionals, realtors, architects, engineers and others.


#3: Transportation Risks

If you or your employees drive in the course of your work, you will also need commercial auto insurance. You need commercial auto insurance if your company owns its vehicles – and you also need commercial auto insurance if you or your employees drive personally owned vehicles to conduct business functions. Be sure to describe any work-related driving scenarios to your insurance agent, so they can determine the best type of commercial auto insurance for your unique situation.

If you routinely transport expensive items like construction equipment or hand-crafted items you intend to install or sell at a different location, you may also need inland marine insurance. Property insurance may not cover these items when they’re away from your business. If this is a common situation for you, be sure to discuss it with your insurance agent.


#4: Cyber Risks

One of the most concerning business exposures of our time is cyber risk. Although it’s important to protect your tangible assets, the increasingly digitized world is becoming more vulnerable by the day. Key exposures include data breaches or attacks on your systems.

Since the onset of the pandemic, ransomware attacks have greatly escalated, and small businesses, without sophisticated IT departments, are often most vulnerable. Now, more than ever, it’s important for small businesses to educate employees and stakeholders on cybersecurity protocols and to use dual-factor authentication to safeguard their data and systems.

You may also be able to purchase cyber insurance. Cyber insurers often provide invaluable loss prevention resources as well as proactive guidance in the event of a breach or hack.


The Importance of Preparing for Business Adversity

If you’ve invested the time and money to start a new business, you don’t want an unexpected situation to undermine all your hard work. Take time to understand and document the potential worse case scenarios, and then talk to your insurance agent about how business insurance can help.


Want to learn more? Contact a FICOH agent today.