Insurance is a very important aid to trade. It is a method by which you can protect yourself and your loved ones from facing a financial crisis.
Insurance is a promise that if something catastrophic happens to your business, your carrier is going to assist you to make your business whole again.
The following are 7 hot cake importance of insurance in 2022…
1. Insurance Aids Trade
In the days after the 9/11 attacks, there were many worries about insurance coverage. Acts of war are not covered by insurance.
Was terrorism an act of war? The big question was, How would the 9/11 attacks be classified? Fortunately, the insurance industry decided the attacks were not an act of war.
However, after 9/11, some insurers began excluding terrorism. But the federal government stepped in and required coverage in the name of keeping commerce moving.
In this case, insurance likely prevented many businesses from avoiding terrorist-targeted operations, such as refineries and chemical haulers.
2. Lenders Require Insurance
This reason is tied to No. 1. Lenders require that you have insurance. Think about it: Mortgage lenders want proof of insurance before you buy or build a new building.
In short, to get the money your business needs to keep going, it’s likely you enjoy the benefits of insurance.
Without insurance, your winning business model can’t get the funding it needs to take its first step, or your established business model can’t get the funding to evolve and better compete.
3. Insurance Can Be Compulsory
Insurance is important because sometimes it’s the law! A great example of this is auto insurance. Auto insurance is compulsory in Wisconsin (home of HNI HQ).
Auto insurance helps mitigate the risk of life on the road (of which there are many!). Workers’ compensation is a form of compulsory insurance that’s required in most states.
4. Insurance Grants Peace of Mind
Insurance, an intangible, provides another intangible: peace of mind. Business owners can take on certain business ventures because they can shift the risk — thanks to insurance.
This reason is the counterpart to No. 2 — lenders require insurance. Insurance is the required (by lenders) safety net that lets entrepreneurs explore opportunities.
5. It Assures Family and Business Stability
Insurance is a safety net for when risks go wrong. Life insurance can support the life of a family, should a member be lost. It’s similar to a business.
The business can carry on, thanks to insurance, should a key member or piece of equipment go out of commission.
This reason why insurance is important dovetails nicely with peace of mind (No. 4). It all goes back to the idea that insurance, when activated, makes policyholders whole again.
6. Insurance Protects the Small Guys
When you look at your industry, you see the “big guys” and the “small guys.” If a risk goes wrong, the big guys will be able to survive.
They can take a hit. But the little guys can’t take a hit. As a result, they are more risk-averse, and in some cases, they sell out to the big guys.
If enough little guys leave the industry (and one big guy swallows them up), you’re left with a monopoly. With insurance, however, the little guys have support if they want to take a risk, which means they stick around longer.
7. Insurance is the Right Thing to Do
A sobering example of insurance in action is the West Fertilizer Co. explosion in Texas this spring. The explosion did $100 million in damage to the community, including schools and hospitals. The fertilizer company had only $1 million in general liability coverage.
Now the city is suing West Fertilizer and likely will win all of the company’s remaining property and assets that were not damaged by the disaster.
This is because the fertilizer company did not have enough insurance. What’s more is the city also is suing the suppliers of the fertilizer plant, claiming they knew they were supplying inherently dangerous materials.