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Small Business Insurance as a Risk Management Partner

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Created by Marilyn K, WriterAccess talent

Marilyn K
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"Next to doing the right thing, the most important thing is to let people know you are doing the right thing." John D. Rockefeller Marilyn K. is a reliable and versatile writer. She strives to make every piece relevant and...

Most small business owners must wear several hats during a working day. Besides running the core company, these entrepreneurs must attend to various aspects of overseeing a growing business, like balancing budgets, managing employees, and strategizing for the future. 

Very often, entrepreneurs can boast of expertise in their industry. However, they may admit they need more experience with risk management or the time to gain expertise. Naturally, business owners understand why they need insurance to manage risks. Still, they will often say they need more time to study the details of insurance policies or the benefits the best carriers offer. 

Luckily, experienced business insurance agents and the insurance companies that they represent can serve as risk management partners. The right carrier and coverage can ensure protection, save money, and help reduce the chance of needing to ever make claims. 

Is Your Business Insurance Agent a Partner or a Salesperson?

Busy entrepreneurs often think of insurance calls as annoying interruptions from salespeople. Yet, the right insurance professionals can offer small companies and startups the same powerful risk management tools enterprises use. 

Thus, instead of responding to insurance agents as salespeople, look for insurers who view themselves as partners who share the goal of protecting your assets. These professionals will take up some time and ask for commitments to buy. In exchange, they can provide financial security and even tools to run the company better.  

Instead of looking at insurance as an expense, consider its potential to save money and, often, offer chances to earn more. 

How Does Small Business Insurance Manage Risks?

A small company or startup faces many threats that can disrupt or ruin the business. According to FEMA, 25 percent of businesses fail to reopen after a disaster. These disasters could include natural disasters, cyberattacks, injuries, and employment practices or liability suits. 

Meanwhile, a typical business owner’s policy will cover fires but not the actions of disgruntled employees. Property insurance might help pay for new computers if a covered event happens, but it won’t protect lost data. Many business owners need help understanding common threats to their business and professionals to advise them. Even the savviest businessperson can’t manage threats they haven’t even imagined. 

To understand how insurance offers small businesses risk management, it helps to consider why they buy coverage in the first place. Small businesses and startups rely on insurance for risk management for several reasons, including these: 

  • Limit financial losses: Small businesses can suffer unexpected losses because of injuries, storms, theft, liability claims, and more. Each company faces unique financial threats because of its industry, location, funding sources, or business processes. Small business insurance reduces exposure to these risks. 
  • Legal compliance: Insurance may also satisfy legal requirements. For instance, most states require some businesses to carry workers’ compensation. Also, many professionals need professional liability insurance to maintain their licenses. 
  • Contract compliance: Businesses may need insurance to comply with contract terms. In addition, strong coverage can make the company more attractive to potential partners. For instance, many contracting firms require their subcontractors to carry specific policies. 
  • Reputation enhancement: Some businesses need proper coverage to let customers and partners know they take their responsibilities seriously. For instance, prudent homeowners will ensure their contractors carry general liability and workers’ compensation. Also, if the business suffers from a threat, the right insurance policy can help them satisfy claims, make repairs, and help them emerge relatively unscathed. 

Let Insurers Help With Proactive Risk Management 

Business insurance companies should offer the right protection package for each unique client. These policies can help insurance clients recover from a covered incident with financial assistance. At the same time, quality insurers will also provide resources to prevent claims before they happen. Business owners should expect proper coverage and tools to manage threats in exchange for premiums. 

Protection Tailored to the Client’s Needs

Many business owners understand the need for general property and liability insurance. Many small companies start with a business owner’s policy, called a BOP, which typically includes general liability and property insurance. 

This coverage provides a good start. At the same time, the owner may not know about their company’s rapidly growing threat of data breaches or cyberattacks. For instance, Atra Security expects cyberattacks against small businesses to increase by 15 percent in the next five years. 

Some small business owners may think digital criminals only target big companies, but SMBs represent over 40 percent of cybercrime victims. Any business with a website or electronic records faces a massive financial and reputation threat. 

Many business owners underestimate the threat of digital crime or haven’t yet learned that insurance companies offer protection against data breaches, lost data, and damaged reputations. Experienced agents should take the time to learn about the company, point out vulnerabilities, and suggest solutions. 

Improved Business Practices to Avoid Claims 

Both insurers and clients share the same goal. Insurance can prevent a threat from turning into financial ruin. In addition, businesses would rather avoid disruption, and insurance companies would prefer to pay fewer claims. Thus, the best insurance partners will also provide their clients with risk management resources, like training programs and customized suggestions to reduce the chance of lawsuits. 

Compliance With Government Regulations

Insurance companies also keep up with legislation, so they can help their clients ensure compliance with regulations. If regulators find compliance issues, they could impose heavy penalties or interrupt operations. News of noncompliance can damage reputations with the public and business partners. 

Save Businesses Money 

Proactive risk management programs offer companies and insurers a competitive advantage. 

That explains why high-quality carriers often incentivize customers to rely on their advice with discounts, lower deductibles, and other perks. Insurers also offer lower rates to clients who make no or very few claims. Thus working with insurers to reduce risks helps save money by controlling premium costs. 

How to Choose the Right Business Insurance Agent 

Business owners who work with their insurers as risk-management partners can enjoy peace of mind and competitive advantage. With threats mitigated, the company may feel confident enough to innovate, take more risks, and pursue growth opportunities. 

Business owners should look for agents who have done their homework and demonstrate an understanding of the industry and a willingness to tailor their offers to the pressing needs of the unique company. They also must represent high-quality carriers that work with their customers as risk-management partners by providing resources and insurance policies. Naturally, lots of eager agents solicit growing companies. 

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