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Insurance is Essential to the Success of a Business
When times are tough, many business owners believe that no
expense is too sacred to be spared from the cost-cutting axe.
The cost-containment craze of the 21st Century promises to be
more than a passing fancy -- it will remain a key to survival in
an increasingly competitive global market. Still, business
owners, particularly of small and medium sized businesses,
should take great pains to ensure that their insurance programs
are not compromised.
A business owner's need for adequate insurance protection can be
greater than the insurance needs of an employee. And while
people whose paychecks are signed by someone else quite
naturally have similar concerns as their employers: protection
against financial loss that can be brought on by death,
disability or insufficient retirement funding, when the employer
is hit by these same circumstances -- everyone can suffer.
Think of the many insurance situations that can impact both a
business and its owner. Most employers don't think twice about
securing property and casualty insurance. These coverages
include auto, property and fire insurance. Other business owners
wouldn't think twice about neglecting liability and other
commercial insurance -- necessities for a business when one
lawsuit can close it down. The protection afforded by this type
of insurance is easily understood.
It's on the life and health side of the insurance coin that many
employers have a hard time understanding the consequences. Most
business owners fully understand the basic principles as they
apply to individuals, but what about the effect insurance -- or
lack of it -- can have on a workplace?
Insurance is most critical in areas that can't be predicted,"
says Leta Finch, director of the Vermont Insurance Institute.
"Many employers are naive when it comes to assessing risk in the
workplace."
When a business goes through a rough time, the employer feels
the pain most acutely. But business owners shouldn't fool
themselves: it affects employees, too. When a business suffers,
employees feel the stress -- a leading cause of health problems
and disability. As these problems mount -- causing loss of
experience, expertise and man-hours -- the business suffers even
further.
Cutting benefits only adds to the stress. Morale can suffer, and
more often than not, quality and customer service go downhill,
too. Perhaps an employer's rationale is that jobs are scarce and
employees have no place else to go. That's short-sighted -- the
availability of qualified workers is as cyclical as the economy.
What happens when the employment market opens up again?
Providing employees with access to adequate insurance is one way
employers can make a lasting impression on a workforce, while
even maintaining or improving morale. And insurance can help to
ensure the success of the business in other ways. When employees
are disabled, they can recoup most of a lost paycheck through
disability income coverage, and the business probably won't
suffer. Likewise when a business owner becomes disabled, a
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disability income policy can help restore lost income. But what
about the business? This is where a Disability Overhead Expense
policy comes in, providing additional benefits for business
owners to help them defray "fixed" business expenses (such as
rent, utilities etc) that must be paid regardless of whether the
business owner can work. Life insurance can also be used as a
means of attracting and keeping qualified personnel, and it can
also be used to fund buy-sell agreements.
When employers find insurance premiums hard to take, Finch
suggests another step they can take to contain costs. "Although
risk assessment and management is quite common in property and
casualty insurance, it is quite foreign to us on a personal
level," she says. "Personal risk management often comes only
from very tragic lessons learned in life. Clearly, if risk
management principles are applied to the disability and health
side of insurance, we can prevent many things from happening,
and we can do it affordably.
Business owners buy many kinds of insurance for one reason --
protection against potential loss. Bad economic times don't
normally change those reasons, or a business owner's need for
insurance.
About the author:
Herbert Williams is 39 years in the Financial Services
Profession.Sales Coach, Financial Consultant and Business
Planner. For a FREE Consultationon how to write a business plan
that will get you the money visit
http://www.money-from-grants.com
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