Let’s step back and consider the larger picture of why insurance is important. Here are seven justifications why why insurance is crucial. What else might you say?
Insurance Keeps Commerce Moving
Following the 9/11 events, there were considerable concerns over insurance coverage. Insurance does not cover acts of war. Was terrorism a war crime? How would the 9/11 attacks be categorized was the major issue. Thankfully, the insurance sector determined that the assaults were not a war crime.
However, several insurers started omitting terrorism after 9/11. However, the federal government intervened and mandated coverage in an effort to maintain the flow of business. In this instance, insurance probably kept many companies from staying away from terrorist-targeted enterprises, such refineries and chemical transporters.
Lenders Require Insurance
This factor is linked to reason number one since lenders need proof of insurance. Consider this: Before you purchase a building or construct a new one, mortgage lenders want confirmation of insurance. In conclusion, it’s probable that you profit from the advantages of insurance to receive the money your firm needs to continue operating. Without insurance, your innovative company plan won’t be able to secure the capital it needs to launch, and your tried-and-true business plan won’t be able to advance and become more competitive.
Insurance is Compulsory in Some States
Insurance is crucial since, in some cases, it is required by law! Automobile insurance is a prime instance of this. Wisconsin requires drivers to have auto insurance (home of HNI HQ). The risk of dying on the road, of which there are many!, is lessened with the aid of automobile insurance. In most states, workers’ compensation is a type of mandatory insurance.
Insurance Grants Peace of Mind
Another intangible that insurance offers is peace of mind. Due to insurance, business owners can shift the risk and engage in specific commercial initiatives. This justification is the inverse of reason number two: lenders demand insurance. Insurance is the mandated safety net (by lenders) that permits business owners to pursue opportunity.
Insurance Ensures Family and Business Stability
Insurance acts as a safety net in case risks turn out poorly. In the event that a family member passes away, life insurance may provide for their needs. It’s the same for a company. Thanks to insurance, the company may continue operating even if a crucial employee or piece of equipment fails. This justification for why insurance is crucial fits in well with the idea of peace of mind (No. 4). Everything comes back to the notion that insurance restores policyholders’ financial security when it is used.
Insurance Protects the Small Guys
There are “big folks” and “little guys” when you look at your industry. The major players will be able to survive if a risk is unsuccessful. They are resilient. The smaller guys, however, are defenseless. As a result, they take fewer risks and may sell out to the powerful. If enough little players quit the market (and one major player absorbs them all), a monopoly will remain. But with insurance, the little players have backing if they choose to take a chance, so they continue around longer. In the end, insurance aids in preventing the formation of monopolies.
Insurance is the Right Thing to Do
The explosion at the West Fertilizer Company in Texas this spring serves as a sobering illustration of insurance in action. Schools, hospitals, and other community facilities sustained damage from the explosion totaling $100 million. There was just $1 million in general liability insurance for the fertilizer firm.
The city is now suing West Fertilizer and will probably succeed in seizing all of the business’s assets and property that have not yet been harmed by the catastrophe. This is a result of the fertilizer company’s inadequate insurance. Additionally, the city is suing the fertilizer plant’s suppliers, alleging that they knew they were providing inherently hazardous products. In the instance of the plant explosion in West, Texas, insurance could have aided in the community’s ability to bounce back from a disaster.
Many company owners prefer not to bother about insurance. However, whether they consider insurance or not, they can always count on it to transfer risk and act as a safety net for new chances.