The Value of Insurance for Small to Medium Enterprises (SMEs)
We consider most things as binary - yes or no, win or lose. Insurance is not as black and white. The relevance of insurance has never been more evident, where we all win when appropriate cover is in place for precisely the risks we could potentially face in the future.
Insurance is acquired for two primary reasons:
- People are unable to personally carry the financial cost of risk should their assets become damaged, lost, or stolen.
- Some contracts, such as purchasing a vehicle, require insurance cover before they can be concluded.
Insurance of any type is all about managing risk, and risk goes hand-in-hand with owning assets, property and valuables. The ability to transfer this risk of loss to an insurer is the purpose of insurance.
But what is the value of insurance to you as a small business owner?
- Insurance provides you with the peace of mind that your business is able to remain financially secure even if you suffer losses to key assets or are unable to operate for a specific period, such as during a pandemic or natural disaster, where you may experience a reduction in your profit due to Business Interruption following storm or fire damage for example.
- It is sometimes difficult for clients to see the value of insurance, especially when they don’t have claims but are paying a monthly premium. Insurance is all about having peace of mind that you are covered against potential risk. Imagine if your vehicle was written off in an accident, the financial cost of that would far outweigh the cost of a years’ worth of insurance premium.
- Insurance allows you to reduce business uncertainty and vulnerability by identifying potential risks and mitigating these risks through the appropriate coverage.
- Most SMEs do not have high liquidity and insurance acts as the shock absorber in times of unfortunate incidents. The value of a good insurance is to put you back in the position you were prior to the unfortunate incident.
Ultimately, insurance is a promise to be there when you need it most.
The challenge in gaining value from your insurance comes down to obtaining the right advice and the right cover, at the right price for you. Inappropriate advice being given at time of policy inception, and speed over excellence, result in many small business owners having inappropriate cover in place which can lead to financial losses and unnecessary spend. It is therefore essential to rely on experienced insurers and brokers to tailor-make the cover you need.