Insurance protects your business by minimizing the financial risks associated with unexpected events such as a death of a business partner, employee injuries, lawsuits, or natural disasters. Insurance is broad name for many types of coverage available to business owners that will protect them against losses and to insure the continuing operation of his or her business. Small businesses and startups often work on a tight budget. As a result, it might be tempting to forgo certain types of insurance that aren’t required by law. 

According to the Insurance Information Institute, about 40 percent of small business owners have no insurance at all because they claim they are cash constrained. The uninsured may be buying into a common misconception – that small business insurance is expensive. The truth is that not having insurance can cost a lot more than annual premiums – you can end up losing your livelihood to a disaster.

Packaged insurance solutions – such as business owner’s policies (BOPs) – give you coverage for basic property and casualty risks at a reasonable cost. If the cost of this kind of coverage is still beyond your means, you might want to look into other methods of reducing the expense. For example, a higher deductible will usually lower your premiums. You may find yourself paying higher out-of-pocket costs should you need to make a claim, but you will be protected when disaster strikes.

Unfortunately, such a risk could end up costing your business way more than the monthly premiums would. While small business owners choose not to purchase insurance for the cost savings and because its not legally required, this is not the best move for your business at all. For example, if a customer or employee were to slip and fall on your property, injuring themselves, it typically can cost business owners up to $20,000 to settle a subsequent lawsuit according to the insurance provider Insureon.