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Compare Business Insurance
Risk is an integral part of the business. Hundreds of factors influence the success of a project, including tax burden, consumer behaviour, and the level of administrative pressure. Business insurance allows the company and its management to look to the future with confidence. It is no secret that an unstable geopolitical situation can pose a threat even to a business project that is firmly on its feet. What can we say about risky startups or companies whose activities can be called seasonal?
To prevent a business from incurring losses, it is necessary to take care of its insurance in advance. In this article, we will tell you right now how an insurance contract will help to avoid various risks.
Why Small Business Insurance is Necessary?
For large organizations with a stable position in the market, losses in case of emergency situations are not very dangerous. For small firms, losses can be fatal. A distinctive feature of small businesses is the lack of working capital. There is not always enough money for operational activities, let alone force majeure.
How to protect your business from collapse due to unforeseen situations? Usually, an entrepreneur chooses one of three options: create a financial reserve, take out a loan or insure a business. Each option has its own pros and cons.
1. Stabilization Fund.
You can set aside some of the money you earn as a reserve. This step requires a certain amount of discipline, and you don’t want to withdraw funds from circulation. In addition, as a result of inflation, money depreciates and it is unprofitable to keep it, even in deposit accounts.
2. Credit if necessary.
Often, an entrepreneur hopes to solve the problem in this way, but the bank may refuse to issue funds. If a loan is given, it will have to be paid with interest. In order not to have to study non-standard methods of loan repayment, it is better to take care of everything in advance and calculate how you will repay it.
3. Business insurance.
This is a general concept implying that you can insure real estate, goods, or obligations to third parties. In case of trouble, the insurance claim must cover the loss. This is a guarantee for the business and its effective protection, which allows you to minimize costs and delegates them to another party to the transaction – the insurance company. Another plus of insurance – the cost of it can be taken into account when calculating the taxable base and reduce income tax and value-added tax.
Remember: When concluding an insurance contract, it is imperative to clarify what is an insured event. For example, if you insure your business against theft, then the losses incurred due to fraudulent activities will not be reimbursed. They fall under the concept of theft, not theft.
Business Insurance: A Guide
What is the purpose of insuring a business? Similar questions arise among newcomers to entrepreneurship who have just begun to develop their business. But, having gone from the moment of opening to collecting a client base and bypassing competitors, to a profitable business, not a single owner wants to lose everything in an instant due to circumstances.
Business insurance is a product with which you can save capital and continue your business without losing money. Many young businesspeople do not believe or do not want to believe that something like a fire, flooding, an accident can happen to their business. But it is much safer to work and at the same time be in complete confidence that even if the elements fall on you, everything can be restored and returned what was lost at the expense of insurance payments.
Advantages and Disadvantages of Business Insurance
The entrepreneurs of our country have relatively little experience in small business insurance. But, despite this, the most demanded products are already standing out:
- insurance against loss, damage, and destruction of transported goods;
- liability insurance for the provision of services;
- insurance of special equipment, cars;
- insurance of equipment, machinery, and other property against damage or loss during construction and installation work.
The presence of these products already speaks of the benefits that the policyholder receives in case of unforeseen circumstances:
- coverage of incurred losses;
- compensation payments in cases where damage is caused to third parties or their property;
- the ability to quickly restore business activities and continue the business;
- the minimum cost of insurance in comparison with the relying payments;
- release of funds set aside for a rainy day.
However, despite the rather attractive benefits, there were some drawbacks:
- postponement of the entry into force of the contract (sometimes it reaches 14 days after full payment of the insurance);
- imposing additional unnecessary products included in the main package;
- lack of the necessary insurance risk in the program;
- delay in the payment of insurance;
- lack of transparency in the terms of the contract.
Therefore, when choosing a policy, the owner faces a difficult task. He must study the features of each program and, on this basis, make insurance and evaluate his own business. Here we will suggest you take guidance from the experts to save yourself from the risks.
Business Insurance Quotes & Entrepreneurial Risks
An entrepreneur inevitably faces many entrepreneurial challenges. Some he manages to avoid and prevent. Part of it turns out to be levelled with minimal damage. But there are those whose appearance the owner cannot influence, which means that it is impossible to undertake anything in advance. It remains only to take the circumstances for granted.
These risks include:
- changes in legislation;
- the emergence of a new strong competitor;
- changes in tax and/or financial systems;
- introduction of obligations to use the latest technologies;
- inflation, currency surges, and other changes in the economy;
- the decline in the income level of the population
Business can also be affected by the geopolitical situation in the world or the situation inside the country, a change in the balance of power or general economic instability.
But the entrepreneur is still able to foresee some of the losses. These are internal risks:
- poor quality of raw materials used in production or the possibility of their deterioration;
- wear and tear of equipment used in production;
- low production volumes or their decline due to economic instability;
- rising costs;
- loss of products due to equipment breakdown or the fault of employees.
Talking about business insurance, one cannot exclude personnel risks. They are connected not only with the need for insurance payments and tax transfers. Overall employee satisfaction with wages and team relationships is important.
There are two types of business threats associated with credit institutions:
- related to the purchasing power of the currency;
- investment-related.
To correctly identify financial risks, it is important to take into account the ratio of own funds to borrowed funds. The highest financial risks are for those organizations whose money mostly belongs to the bank. At the same time, any change in the terms of the loan agreement, whether it be an increase in interest or a tightening of payment conditions, etc., can lead to a crisis.
A type of risk is an investment in innovation. Financing new technologies, looking for reserves to increase productivity, reduce production costs, an enterprise always runs a risk, since such actions may or may not justify expectations. It is highly likely that there will be no demand for a new product or service.
Types Of Business Insurance
The activities of entrepreneurs in the UK are very diverse. This prompts the development of new insurance products for small and medium-sized businesses. Traditional insurance products that protect against the main risks of entrepreneurs do not lose their relevance:
The likelihood of losses in the implementation of commercial activities is extremely high. Natural disasters, fires, communal accidents, illegal actions of third parties – the list of traditional risks is supplemented with specific threats. So, when implementing projects, entrepreneurs are faced with bank bankruptcies, dishonest counterparties, fraud, raider seizures, and financial fraud.
Market leaders have proposed comprehensive protection measures:
a) Business Building Insurance
The owners of industrial and office facilities are sold policies in case of fires, floods, intrusion of criminals, acts of vandalism. A wide range of options is offered. Special coverage is provided to the construction, installation, and technical risks. Companies are able to protect themselves from the consequences of accidents and emergencies. Upon the occurrence of the agreed event, the owner is reimbursed for up to 100% of losses. The policy may apply not only to the building but also to the equipment. Compensation often includes funds for the restoration of communications, repairs, or the purchase of new equipment.
b) Business Fleet Insurance
The main insured events are traffic accidents and theft. The product is especially popular among companies with a large vehicle fleet. The existence of an agreement guarantees the stability of the activity. When an insured event occurs, the company quickly compensates for the losses and continues to work as usual.
c) Enterprise assets
Business risk insurance includes protection against the loss of property, plant, and equipment. Credit and leasing organizations, as well as investors, insist on buying a policy. The owners of the company can conclude a contract on their own initiative. The list of events covers damage, theft, complete destruction of valuables. At the same time, the policy does not cover the gradual depreciation of equipment on the market.
d) Simple production
The insurer assumes the risk of an unexpected shutdown of industrial facilities. Under the contract, the entrepreneur or company is compensated for losses. An insured event is a breakdown of equipment, emergencies, natural disasters, strikes, and even a disruption in the supply of raw materials. The insurer’s liability period is limited. The downtime for which the reimbursement is calculated varies from 3 to 24 months.
Important! When choosing options for this type of insurance, be sure to consider the possibility of independently determining the recovery period from the crisis and compensation for losses. Consider the policy as an option to insure your business against possible bankruptcy.
Attention! Business insurance for individual entrepreneurs has several differences. Protection applies only to objects used in commercial activities. Personal property is not included in the listing. It is important to establish clear boundaries when signing an agreement. Of course, the more clauses the contract includes, the higher the price of business insurance will be.
Any harm to life, health, the property must be compensated. This applies to both legal entities and individuals. Situations often arise when the amount of compensation for damage is so large that it becomes unaffordable for the culprit. The state has foreseen such situations. Today, a special type of business liability insurance has been developed. In this case, the status of the policyholder does not matter. The responsibility is the same for an individual entrepreneur and an individual.
Small and medium-sized businesses have the opportunity to choose from types of liability insurance:
- when using various premises;
- insurance of manufacturers and sellers;
- environmental risks;
- when working in conditions unfavorable for life and health;
- in the conduct of professional activities.
When an insured event arises at the enterprise, the company has the opportunity to compensate the victim, take on the costs of litigation, and settlement of issues with the victim without involving the culprit.
Small businesses are extremely dependent on unforeseen circumstances. Any of them can turn into a tragedy. As a rule, such companies do not have a reserve fund, and the damage cannot be compensated using working capital. Insurance coverage in such situations can minimize losses.
Small business insurance in the UK includes:
- property protection;
- liability of a legal entity;
- risks in case of possible loss of production.
In cases where a businessman applies to credit organizations for receiving funds to open his own business, banks insist on compulsory business insurance as collateral.
Speaking about voluntary business insurance in the UK, it is worth noting that it is in its infancy. Small businesses do not have government support. The law provides for benefits for the purchase of insurance. But in reality, there are practically none. Entrepreneurs have to spend their own time and energy looking for the right product.
The current economic situation because of COVID-19 in the world is unstable. And not only in the UK. Every day we hear about financial crises that have a significant impact on the activities of large companies. At the same time, medium-sized businesses are always at particular risk.
Consultants advise considering insurance of a business (in particular, its property) as protection against unforeseen circumstances, such as:
- fire;
- accidents, including engineering communications;
- illness or change of key employees;
- crimes at work;
- failure of equipment.
Not all entrepreneurs know that insurance provides additional benefits and benefits. This applies to obtaining tax benefits. All costs incurred by the company in the life insurance or industrial accidents are tax-deductible.
By purchasing a basic insurance package, you can supplement it with a personal insurance service for employees. This will enhance the company’s image and help attract or retain promising specialists. And enterprises that pay taxes according to a simplified scheme, namely “income minus expenses”, receive additional benefits by reducing the tax burden.
Preferred types of personal insurance for business:
- If necessary, the employee will receive medical assistance at the expense of the insurance company.
- Accident insurance. If an employee is injured at work, he is entitled to claim compensation payments from the insurance company.
- Corporate cumulative life insurance. The program involves the opening of savings accounts by the company for employees, where money is regularly transferred. After a person has completed the full term under the contract, he receives additional accumulated payments.
Business Insurance Recommendations for entrepreneurs
It is difficult to describe each area of insurance for small and medium-sized businesses in the UK. The market does not stop developing, and new projects appear every month. Insurance companies are reluctant to reduce tariffs because commercial activities are characterized by increased risks.
When concluding contracts, lawyers recommend:
- give preference to large and reputable companies;
- carefully study the rules for providing protection, documents of the official website;
- analyze judicial practice;
- provide the agent only with complete and reliable information.
Here, you must know that it is impractical to insure everything at once – the cost of insurance will be very high. It is important to understand what losses will be critical for your business and proceed from this.
Business Insurance & Coverage: Let’s Sum Up
Thus, business insurance is a kind of “safety cushion”. Many businesspeople prefer to save on insurance, fearing red tape with documents, refusal to pay when an insured event occurs, or superstition. However, in the modern world, insurance allows you to protect your business from unforeseen circumstances. You just need to correctly assess the company and choose the right insurance product. Therefore, if you have just started your way in the world of business, do not immediately refuse the importance of business Insurance. Instead of immediately taking such information with hostility, it is better to carefully study the offers of several insurance companies and opt for one or simply contact us for proper guidance. Our specialists are ready to guide you.
James Ward is CEO and founder of CompareYourBusinessCosts.co.uk, a website that won the Prestigious ‘Website of the Year’ only in its second year of operations in 2015. The website has grown organically since then offering comparisons on over 20 different products including insurance, energy, telecoms, card machines, coffee machines and much more. James has a range of interests including horse racing, skiing, rugby and boxing. He splits his time between home family life, friends, exercise and socialising.