In business, we always hope for better times and do much to plan for success. We do set goals and work hard to meet them. After a while, not many do take time to look back and assess their performance and even when it’s done, fewer people do take time to analyse the factors for the realised performance. Our experience at BLEGSCOPE is, most of our clients who are business owners and managers, will have somebody or some event to blame for the not-so-good performance and will comfort themselves as such factors to be out of their control.
What often comes to my mind as such excuses come around is Insurance.
The story is still not any different for those that come out successfully and manage to meet their goals. The businessman always plays in a field of high uncertainty and no level of success will guarantee adequate financial security in the medium to the long term. It does not matter how big your monthly budget is, or how much savings you have. When you least expect them, you’ll encounter situations beyond your possibilities and you can never be completely secured. This is why you need to take all the safety measures you can to secure your financial state, and the best way to do so is through insurance.
Insurance is the best defensive measure for financial stability. Even if you have a lot of savings put aside in a safe place, there can always be some kind of disaster that will drain all of your savings. In such situations, insurance is the only means to protect your finance.
Getting to the basics, what is insurance?
This is simply an arrangement by which an insurance company undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified amount of money called a premium. Insurance is largely split two segments; General and life insurance and thereafter, there are many classes of insurance that cover the likes of Fire, burglary, goods in transit motor comprehensive and many others.
Many business owners feel business insurance is an expense they cannot afford, or is a luxury for more established businesses. Although it is true that business insurance can be expensive, it is an expense every business, regardless of the industry, size or length of time in existence, needs to include in its budget. Whether your business is capital or labour intensive, high or low tech, consumer or service oriented, insurance can provide a wide range of benefits. Insurance can influence who works for you and why. It can protect business assets and revenue. And in many cases, there are laws and regulations that require insurance, so that companies can experience the best benefit of all: staying open for business. By getting the right type of insurance, you can protect yourself from sudden and paralyzing damages, while saving time and money.
As with most insurance types, business insurance is used to protect the business and the business owner should unforeseen events happen to the business. The trick is to make sure that your business is covered for those events that are most likely to happen and to never find yourself unprotected, which might lead to the financial collapse of the business.
Business insurance can be purchased to cover virtually every aspect of the business. For example, most business owners have a policy that protects them should they lose their business property. Fire and theft insurance would be two means of doing this. Business owners may also want to protect their inventory and their equipment. As well, they most often want to have some form of protection in case an employee is injured on the job.
The types of business insurance and the levels of coverage are often determined by the type of business itself, but it can also be influenced by lenders who hold portions of the business as security against loans that may have been made to the business in the past. Lenders who have financed expensive machinery or other types of equipment will often want the business owner to have some form of insurance on the machinery. This use of insurance helps to protect the lender as well as the business owner should loss occur to the insured item.
The use of business insurance is also important as a form of protection against personal liability. Personal liability is when a business owner or owners can be held personally responsible for injuries or damages that occur on the business property or during the course of normal business operations. If a business owner is found to be personal liable for damages or injuries, the owner will have to use his or her own assets to pay for those injuries or damages. This might include the sale of a private home, cars, cash, savings, or any other asset that has value. There are business insurance policies that can help protect an owner against such claims.
Ignoring insurance may cost you everything that you have worked for and earned in just a blink of an eye.
Brian is the Managing Director at BLEGSCOPE®, and has over 9 years of management consultancy experience notably in the finance and banking industry, MSMEs, FMCG companies and in the service industry. You can follow him on twitter: @BrianAhabweK