You’ve probably heard by now that business insurance is important for your business. But that doesn’t make the need real to you. Sometimes, putting it in terms of dollars and cents drives the point home.
Insurance Journal claims that these common small business insurance claims cost anywhere from $8,000 to $50,000 per incident and can cost your business big if you don’t have the right kind of insurance coverage.
While fire claims, impacting 1/10th of small business owners, are ranked among the top five in terms of both cost ($35,000) and being most common, below are some of the other most common and costliest business insurance claims, according to The Hartford Reports.
5 Common Business Insurance Claims
1. Reputational Harm
This includes claims that you have violated the privacy of others or committed libel or slander against them that has caused damage to their reputations. Oddly enough, reputational damages are often the greatest and one claim costs businesses $50,000 on average.
Privacy is a growing concern for businesses and consumers with people who have malicious intentions finding new ways to break through your privacy protections at every turn. Make sure your insurance is up to the challenge.
2. Burglary and Theft
While not the costliest on a “per instance” basis, the widespread prevalence of burglaries and thefts adds up over time. It is the most common insurance claim made by small businesses, accounting for 20 percent of all small business insurance claims with an average cost of $8,000 per incident.
3. Customer Injury
Customers are injured all the time. Whether from slips and falls, pulling items off shelves on top of them, or countless other wild and crazy reasons. The problem with customer injuries is that the instant response is often to sue – even if the customer knows your business isn’t at fault.
Litigating or defending your business can be costly and the court costs and attorney fees remain even if your business is cleared of responsibility. The average cost of a customer injury or damage claim for small businesses is $30,000. That’s not something the average small business can easily absorb and move on from – especially if you’re facing claims from more than one customer.
4. Water and Freezing Damage
Ice dams form. Pipe burst. Bad things happen when winter weather sets in – and at surprising other times throughout the year. The damage from water and freezing events can be very costly for your business. Since most small businesses operate on a rather slim profit margin (because you are busy re-investing in your business to help it grow), one major loss in a brutal winter can be devastating.
And it is more common than you think as water and freezing damage is the second most common cause of damage for businesses. The fact that each incident costs approximately $17,000 only exacerbates the problem for businesses on budgets.
5. Product Liability
With widespread product recalls happening all the time – some of them due to devastating injuries being caused by products you may have sold in your store – it is more important than ever to make sure you have the right kind of liability insurance to protect your business from the potential financial fallout related to these recalls, injuries, and, sometimes, deaths.
Product liability claims remain within the top ten most common insurance claims and carry a hefty price tag of about $35,000 for each incident. In the event of multiple claims, which is often the case when products are recalled, those numbers can add up to staggering amounts of money very quickly.
Getting business insurance is an important first step for protecting your business. However, you need to dig down deeper and go beyond what a standard business owner’s policy (BOP) offers to get the coverage your business needs in today’s business climate. That is why it’s so important to work closely with an agency that understands your communities and the unique challenges businesses within your community face, the needs of your industry, and what your comfort zone is when it comes to risks versus. insurance protection.
It’s true that small businesses rarely have piles of extra cash hanging out, unused, or shoved in the corner. You can’t afford to spend wastefully on small business insurance, yet failing to get the right kind of coverage can be as devastating as going without insurance altogether. Look for policies that offer the right balance of coverage and costs and that fall within your comfort zone of risks. Most importantly of all, make sure you’re at least covered for the common risks listed above.