2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Even the most adventurous and daring entrepreneurs think about the possibility of some risks. At the same time, excitement multiplies many times if a person is engaged in the work of his whole life. In this article, we will look at what business insurance is, as well as its main varieties.
How did this concept come about
First of all, it is worth understanding what the essence of a market economy is. This concept means the relationship between various economic entities. This includes the state itself, as well as its citizens. At the same time, market relations are the sale and purchase of certain goods and services, where some subjects are sellers, while others are buyers.
In the process of such interaction, fierce competition arises. Therefore, in order to maintain their opportunities in the market, the subjects begin to act quite risky. It is due to the presence of such risks that such an industry as business insurance appeared. This type of activity can provide significant assistance in reducing possible economic risks.
Of course, independent business is a rather complicated and responsible process, where every businessman is fully responsible for his property. Business insurance will help protect individuals from possible risks of failure. However, it should be borne in mind that, just like running your own business, insurance will require certain financial costs from you.
Main reasons for lower yields
Of course, creating your own company is not easy, but it is even more difficult to ensure its prosperity for many years to come. Sooner or later, any, even the most demanded and promising business, can fail. Consider the main reasons why this can happen:
- changes in tax legislation, as well as the depreciation of the monetary unit;
- fires, accidents and natural disasters;
- introduction of new laws restricting the conduct of certain types of activities;
- making mistakes by company employees (human factor);
- disturbances in the economic situation of the country can be the main reason for the decline in demand;
- loss of the main specialists of the organization.
No one can accurately predict the main reasons why an enterprise may go bankrupt or lose large amounts of capital. But in order to minimize the risks listed above, you need to pay attention to such a service as business insurance.
Risks and insurance in a business plan
Given negative risks in businessplan, you can greatly facilitate your work, and save a large amount of money. Of course, it is absolutely impossible to predict all the risks associated with your type of activity, but it is very possible to reduce them to a minimum amount. To do this, you need to draw up a risk analysis in your business plan, and be sure to consider ways to reduce them. Whatever you do, be sure to develop a business plan. Insurance will help you avoid negative consequences.
Small and medium businesses
The bankruptcy of a company occurs when its owner can do nothing more to revive it. Small business insurance is a very reliable and sure way to avoid losing all your money as a result of the closure of your organization.
After receiving an insurance payment, you will have another opportunity to revive your business or start something new again. This way of dealing with risks is very effective in activities related to the provision of services or the sale of goods on credit and installments.
Most often, business insurance includes the following items: property, liability and business interruption insurance.
Property insurance
Imagine you start a new business. To do this, you will need to rent or buy premises, equipment, furniture and other items. All property purchased or rented by you can be stolen or damaged. So with the help of property insurance you canget back all your wasted money. However, please note: for this type of insurance, you need to provide the exact cost of all purchased or rented goods to the insurance company.
By drawing up an insurance contract, you can protect the premises, material assets, goods, office equipment, equipment, as well as money in a safe or in a cash register.
In this case, the cost of insurance is calculated purely individually.
Liability insurance
Such insurance can protect you in the event that your organization has harmed the customer or he has claims against your goods and services.
To understand exactly the meaning of this type of insurance, consider an example. For example, you are the owner of a hairdressing salon. The master working for you unintentionally harmed the he alth of your client and he is demanding damages from you. If you are unable to pay for it, then the insurance company will come to the rescue.
Business interruption insurance
An unplanned break can occur during the operation of every business. Of course, it is possible to foresee such breaks as holidays or vacation of employees, but what to do in case of force majeure circumstances? For example, if there is a fire at your factory?
All types of work will be suspended, so you are forced to spend funds on restoration, damages, and also need to payemployee salaries, taxes, and so on. In this case, business interruption insurance can cover all your unplanned expenses.
Insurance and business valuation
Evaluation for insurance is needed to make the correct calculations of insurance premiums.
Each modern insurance company should have a very clear and objective idea of the value of the insurance property. An independent insurance assessment allows specialists to quickly assess all risks and build an insurance portfolio.
Usually, insurance companies turn to third parties who are involved in such calculations, and based on the data received, put forward their own conditions for insurance.
Helpful tips from insurance brokers
Business insurance (Sberbank also provides this service) must be done correctly.
Let's look at some important tips that can help you when choosing an insurance company:
- Don't insure your favorite business "against everything". First of all, analyze your type of activity well and take into account the maximum possible risks. Only after that contact the insurance company. This will help you not only correctly calculate your funds, but also conclude a correct and important contract.
- Approach the choice of an insurance company consciously. Of course, there are thousands of them on the market today. Do not take risks and choose only time-tested organizations.
- Pay as much attention as possible to the insurance contract. Fullystudy this document, because very often insurance companies leave a "hook" for which you can then catch on. And believe me, it will be far from in your favor.
Managing your own business is a very difficult and responsible task. It is very difficult to predict where negative risks will await us. So it's always better to play it safe. This will help you protect yourself from unplanned expenses or even bankruptcy. Good luck in your endeavors.
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