Merchant Advance Blog

Blog Article: Business Insurance: A Primer

We live in a world where unexpected things can happen. Prices of goods may change on a dime. Regulatory policies may be introduced or modified in a certain industry that will change the way your business interacts with its target market. And occasionally, instances of injury, professional liability, negligence, wear or damage to equipment may rear their heads in the path of any small business plan.

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Would your business be prepared in the event of just such a setback? Having sufficient cash on hand to deal with an interruption or complication (lest one arise) is a critical component of any business strategy. In addition to having a trustworthy and consistent source of access to capital, business insurance is a valuable form of protection against the unexpected. Today’s blog looks at some of the different options and applications of insurance for small businesses.

Protecting Your People

Great employees are the resources that form the core of your business, drive its success and move it forward. Personal insurance (such as that covering life, disability and critical illness) is of particular importance if your small business is a sole proprietorship or limited partnership: if your business partner passes away, for example, partnership insurance will allow you to purchase the shares and continue running the business. Some of these may be deductible as business expenses, while others will need to be paid for as an individual.

Protecting Your Revenue

Having a client that does not pay can leave you in a difficult situation. You have to pay your employees and suppliers, and are essentially stuck covering the costs of goods sold, without the corresponding revenue. Accounts receivable insurance, also known as credit insurance, can help protect you from this risk, when a client goes bankrupt or refuses to pay.

Protecting Your Assets

In the event that a disaster or emergency destroys part or all of your business premises and assets, you could include business insurance for property, contents, business interruption and/or vehicles. If you are leasing space for your business, the owner of the property probably has property insurance, but you are likely responsible for your own contents insurance. If you run your business out of your home, you will likely need separate contents insurance for your business assets.

On the other side of the proverbial coin, businesses should review their existing policies on a regular basis to see where they need to focus their insurance coverage and where they might be able to reduce costs. Consider the size of your staff and the demographics of your employees. Certain equipment or goods, for example, might have a very small chance to break down or become damaged. As small businesses change and grow over time, their needs in this regard change as well.

With any luck, we’d wish little in the way of damage or disruption on any business. However, being adequately prepared and managing your plan to keep things running through a difficult spot is a wise course of action to consider sooner rather than later.

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