General insurance protects you and your assets from the financial risk of something going wrong.
It can’t stop something happening, but if
something unexpected does happen that is covered by your policy it means you won’t
have to pay the full cost of a loss.
That means that if something goes wrong,
you’re much less likely to have to raid your savings or your investments,
borrow money, ask family or friends for financial help, or sell your assets to
pay for repairs, building or outstanding debts.
You won't have to rely on assistance from
governments and community groups that usually only help in disaster situations
such as floods or bush fire where the assistance might not reflect the extent of
your loss and so may not help you to rebuild your life.
Insurance is tricky. It's not like buying a chair or a shirt or
groceries. When you buy insurance, you're buying a promise. It's a
promise that if something catastrophic happens to your business, your carrier
is going to assist you to make your business whole again. Sometimes, though,
it's tempting to question the value of insurance because it is an intangible
product.
Let's back up and take a big-picture view of why insurance matters. Here
are seven reasons why insurance is important. What more would you add?
7 reasons
why insurance is important
1.) Insurance Keeps Commerce Moving
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 is Compulsory in Some
States
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’ compensationis 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 opportunity.
5.) Insurance Ensures 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 for a
business. Should a key member or piece of equipment go out of commission,
the business can carry on, thanks to insurance. 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. What it comes down to is that insurance helps prevent
monopolies from forming.
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.
Most people buy insurance for four main reasons:
- High value
To protect something they have purchased that has a high value (such as a house, a car or perhaps jewellery or a painting) and which would be expensive to replace. Often a loan has been taken out to purchase the items - Catastrophe
To protect their property and possessions against a disaster, such as a fire, flood, cyclone or other calamity - A specific
event
To protect them when they are doing something not covered by their normal insurance policies, such as travelling overseas - Liability
To provide financial protection if sued – for example, if a visitor should sue you for negligence after injuring themselves on your property
Now the city is using 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
to the fertilizer plant, claiming they knew they were supplying inherently
dangerous materials. In the case of the West, Texas, plant explosion, insurance
could have helped a community to recover after a crisis.
Insurance is something many business owners don’t
want to think about. But whether they think about insurance, with hope
it's there, allowing for transfer of risk and providing a safety net for new
opportunities. 
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