Thursday, September 27, 2012

5 Myths About Business Insurance

The sad difficult-to-market truth about public liability insurance is that it doesn't really care about you as a person. Instead it works out where you are on a spreadsheet, how much you could cost the company and whether you're worth the risk. It's a form of gambling whereby if you lose, you sort of win, which is supposed to balance things out. Also, just like gambling, the house always wins and in this case it should win, because if it didn't, everyone would lose.

That is admittedly a tortured and awkward way of putting things, so now that I've successfully confused myself - let alone any of you reading this - into a neat little muddle, let's go through five popular myths regarding to business insurance.

1. I don't need insurance because I'm careful

It's an understandable logic, but it's not always up to you when you have an accident. Let's put the fact that everyone has off days to one side for the moment and consider that you cannot always control the factors that circle your life on a daily basis. A good analogy would be driving: it doesn't matter how careful a driver you are, there are millions of other people on the roads who really aren't and might be about to leap out of that turning too late for you to do anything about.

Being careful is a given. In fact, insurance is unlikely to cover you at all if you are reckless or have behaved stupidly, but being careful can only stop so many accidents. Business insurance is there to catch the rest.

2. I don't need employers' liability for temps or volunteers

This is just plain incorrect. The requirement for insurance is not triggered by you having a full time contract or paying an individual for their services.

If you think about why insurance is there in the first place, this does make sense. You are responsible for the well being of these people because they are doing what you tell them to do (or at least they should be). If they then have an accident or become ill due to something that you've done, they should be able to seek compensation for that. Whether the individual involved is paid or not, or is full time or not, really doesn't and shouldn't factor into the equation.

3. I'm not big enough to need insurance

This argument can cut both ways. If you're not that big, you probably can't afford not to have insurance as well. A single unfortunate accident could put out of business completely. If you're not a big company, then chances are that unless you do something extraordinarily risky, your premiums won't be that big either. What you pay is largely dependent on the size and scale of your operations. Equally if you do something that is so dangerous that you have such high premiums, you really can't afford to not have insurance anyway so you might just have to live with that expense. Additionally, if you're a small company, you could actually be personally liable for some claims and some of your personal assets could exposed depending on the nature of the liability, so it's even more important to check up on this.

4. I work from home therefore am covered by my home insurance

That might be something you want to check. Most home insurance policies won't cover a workplace, and if you work out of a spare room or from the kitchen table, you might find you've inadvertently turned part of your home into a commercial property.

Although you probably won't need anything like public liability insurance as it's unlikely that you'll be receiving a large number of visitors, some form of cover for important documents, equipment, or anything else that's critical to the running of your business might be something you need to look into.

5. If it was that important, it would be a legal requirement

I can understand the logic in this - after all car insurance is a legal requirement, as is employers' liability, so why not other forms of business cover like public liability insurance?

I'm not sure why it isn't a legal requirement, but even with this in mind, it would not reflect well on you as a company if you had reached a certain size or level of risk and hadn't taken it out without a very good reason.


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