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What Is Business Insurance?

All discussions relating to Business Insurance and Business Finance

What Is Business Insurance?

Postby hansel » Fri Apr 01, 2011 2:50 pm

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Joined: Thu Mar 31, 2011 5:52 am

What Is Business Insurance?

Postby emmet » Fri Apr 01, 2011 2:54 pm

The term "business insurance" encompasses all the different types of coverage available to protect business owners from losses. Through business insurance, you can cover your property and business vehicles, insure against legal claims against the business such as liability or workers' compensation, and also provide health insurance for your employees, among other things.
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What Is Business Insurance?

Postby keri » Fri Apr 01, 2011 2:59 pm

“Business Insurance” is a broad name for different coverage available to the business owner to protect against losses and to insure the continuing operation of the business.

Most people are familiar with insurance for their personal home and automobile. This coverage protects you financially in case of an accident or disaster to your home or car. We are familiar with these types of insurance because it is natural for most people to realize that they would be unable to replace their home tomorrow if there was a fire or to replace their automobile if there was an accident.

The same principle applies to business insurance. The principle is one of risk. There are risks that, while they may never occur, are so destructive that it makes sense to plan ahead and manage the risk. In our personal lives these risks are often more easily foreseeable.

For our businesses, however, we often do not consider risk or believe that the risks cannot be managed and so we turn a blind eye hoping that nothing “bad” happens. Some business owners I have worked with believe that since their business is profitable with a positive cash flow they can take care of the disaster when it happens. They forget that if the business is not operating – there is no cash flow.

Business insurance is nothing more than spreading and managing the risk among many business owners. Insurance companies take in premium payments from many covered businesses, invest those payments, and create a pool of money to pay out to a covered business if that business has a covered loss. Over the last 300 years, insurers have developed mathematical models to determine what chance there is of a risk occurring and, in so doing, what premiums the insurer must charge to stay in business and make a profit. Over that same time, insurers have developed approximately eight to nine general categories of losses that seem to happen with more frequency. The insurers developed particular policies to address those types of losses.

Business insurance is a broad description that encompasses these different types of policies. Because there are so many different types of coverage it is confusing. But, at the very basic level, the concept is the same – the management of risk.
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