Part of the nBuy Life Event Network

Our home planning centers: 

6 Reasons Why Your
Personal Business
Needs Insurance

home equity articles and tips

 

It’s an unfortunate fact of commerce that your personal business may one day face the threat of a lawsuit. This lawsuit could come from anyone—an employee, a customer, a client—and for the most trivial reason.

Here are 6 reasons why you need to protect your business from a possible lawsuit:

A single incident is enough.

Even if you do manage to prove in a court of law that the incident was a simple accident or not as significant as the other party had made it out to be, you still have to pay a large amount of money to defend yourself.

Unexpected things happen

The other party may make a big fuss over a minor accident. Perhaps a customer may sue you for breaking a contract because your delivery truck broke down when providing a service. Perhaps a customer may make a personal injury claim because the slipped and fell when entering your premises.

 It’s not enough to incorporate your business

While personal assets are often separated from business assets after a small business is incorporated there are exceptions to this rule. Business insurance will protect you when corporate protection does not stand up in a court of law.

 Don't rely on other people's insurance

 While another party may have insurance in the event of an accident, it may not be enough to cover your losses. For instance, if a car runs into your delivery van, their auto insurance may only cover their costs and not yours, or their insurance may not cover your loss of income. Quite simply, you cannot afford to not fully all your vital business assets.

 A loss cannot be forecast

When losses occur, they usually occur without warning. Your computer system could go up in flames, your merchandise might be stolen, or a natural disaster could level your building. Without insurance, you could go bankrupt overnight due to an unexpected event.

 Understand your coverage and policy exclusions

If you don’t understand your coverage, you may think you are covered when in fact you are not. Perhaps, you are driving your personal car on a business trip. Will your personal automobile insurance cover you if you have an accident and are deemed at fault? It may or may not. You have to make sure that you understand what your insurance does and does not cover. Additionally, be aware that there are exclusions to different types of policies and ensure that you get enough insurance to cover for them.

For instance, with general liability insurance, employment liability claims might be excluded; with commercial liability insurance, property loss claims might be excluded; and with homeowner insurance (if you have a home-based business), business assets might be excluded.

It does not matter how nice a person you might be, how well you run your business, or what products or services you sell. If you aren't prepared ahead of time to protect against a lawsuit, you and your business could go bankrupt.

Informational credit to Drayden Insurance Ltd., an Edmonton commercial insurance company.