The concept of insurance is easy enough to understand. You make payments now so you can receive compensation in the future if an adverse event occurs. We all know we need insurance, yet 75 percent of businesses in the United States are underinsured by 40 percent or more, according to Marshall & Swift/Boeckh. What’s more, 40 percent of businesses never reopen after a disaster, based on data from SCORE.
So why aren’t small-business owners getting proper insurance? Is it because the small-business products are difficult to understand? Do I need general liability, professional liability or errors and omissions? Or is it because the value is often unrealized? Will I have a significant hazard? Will the product I bought cover that hazard?
For whatever reason, we know small businesses are woefully unprotected from hazards and catastrophes, should they take place. Based on a survey from Insureon, at least one in three small-business owners experienced an event in the last 12 months that could have led to an insurance claim. Clearly, the likelihood that small-business owners need insurance is quite high.
How SMBs think about insurance.
According to new research by FreshBooks that surveyed 1,100 small-business owners in the U.S., 63 percent say they’re generally aware of the risks to their business. These risks often include theft, getting sued, car accidents and contract disputes.
A full 60 percent of small-business owners say they have insurance. Yet more than 40 percent believe their personal insurance is sufficient coverage — even for business claims. Putting it all together, more than 80 percent of small-business owners don’t have small-business insurance or rely solely on their personal insurance for business protection.
Common ways SMBs are at risk.
Among the 1,100 small-business owners surveyed, below are the top 10 most common ways in which small-business owners are exposed to business risks.
- 84 percent have a home office
- 64 percent use a personal vehicle for work purposes
- 53 percent spend time on client premises
- 50 percent keep sensitive/personal information on clients