Insuring against risks
Taking out comprehensive insurance is one of the most important ways you can reduce business risk. Insurance reduces risk by transferring it to the company that issues the policy. You pay an insurance premium rather than risk the possibility of a much larger loss.
Some decisions regarding insurance have already been made for you, such as:
- those required by law (e.g. workers' compensation)
- those required by customers, clients or other businesses (e.g. where lenders require you to take out insurance before they will finance a vehicle).
It is your responsibility to identify risks in your business and decide which ones to insure against.
As a business owner you should be aware of all of the potential risks to your business. Look closely at your business operations to identify all potential risks. These could include:
Prepare a risk management plan
Once you have identified and evaluated possible risks, prepare a risk management plan. This will help you decide which risks you absolutely must insure against and which ones you can protect yourself against in other ways, such as deciding not to sell a particular product because it is likely to injure clients.