Do I need business insurance for a limited liability company?

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Every business deals with multiple risks, but the level of risk varies from one model to the other. For example, when a customer sues a sole proprietorship for damages, the owner becomes fully liable and may end up losing every asset including personal ones. This is why a lot of entrepreneurs prefer more secure structures like a limited company.

When running a limited company, no one can touch your personal assets, while you also get to avoid double taxation. But don’t be fooled by these privileges and assume that you don’t need further protection.

In this post, we share six reasons your company needs business life insurance.

Protect key persons

In today’s competitive world, some employees are tough to replace. If a key employee of your business passes away or resigns unexpectedly, you need to have the necessary financial support to compensate for the loss.

Business insurance comes in handy to cover the lost revenues, the cost of searching for a replacement, and any pending debts. An excellent solution is to purchase key person insurance to protect your limited company in such situations.

Protect business assets

Sure, your personal assets may be untouchable, but the same cannot be said about those of your business. Such assets as cash, inventory, vehicles, buildings, office furniture, account receivables, and patents need protection, or else they may be liquidated when a risk occurs.

How can your business asset be in jeopardy, though? Let’s look at this example: your limited company borrows a loan from a commercial bank and names a director as the guarantor. Unfortunately, the guarantor passes away, and the lender calls for immediate settlement of the outstanding amount. If the company didn’t take out business loan protection, you would be forced to liquidate one of your business assets to finance the loan.

Protect your company against lawsuits

Being sued isn’t news in the business industry. Once you establish a successful company, you can get sued for the flimsiest of reasons. When this happens, you must get an attorney, create time to attend court sessions, and worst of all, hang your reputation in the balance.

The good news is, you can prevent all these by getting business insurance for the company. This cover helps to ensure that it’s no longer liable for third party claims of defamation, bodily injury, or property damage. It can also protect your business assets, and in some instances, even your personal ones.

Protect your employees

Human resources are the lifeblood of a company, and they deserve absolute protection. This is the only way of keeping them motivated, productive, and feeling a part of the system. Employees face different job-related risks such as injuries, exposure to chemicals, organizational changes, and so on.

Employee benefits provide adequate financial protection and mitigate any health risks that a worker may face while on duty. This package also serves as a compensation to the employee’s family in case they lose their lives or get diagnosed with a critical illness.

A requirement of the law

Regulators require that you have certain types of business insurance policies before they can permit you to operate. For instance, the employer’s liability or employee benefits are a mandatory requirement for any company that employs staff.

By taking out business insurance, you’re able to protect your business from financial loss resulting from work-related injuries and illnesses. Besides, this policy protects the company from customer claims of damages, theft, or fire destruction.

Business insurance builds reputation

There’s more to business insurance policies than protecting the limited company. You need to send a message to the contractors, creditors, and customers that your risk management game is above-par. This cover also offers assurance to every staff in the company that their safety is guaranteed, no matter what unfolds.

Moreover, having the right policies gives you an edge over your competitors. Customers get the impression that your products are safe, and should any accident occur, they’ll get fair compensation.

Conclusion

Building a successful business from scratch takes a lot of resources, time, and dedication. But the sad truth is, a costly lawsuit or other common risks can easily ruin all the efforts if you don’t install the right mitigation measures.

Business insurance offers invaluable peace of mind as it’s a guarantee that your company will always remain protected regardless of the situation. Having the right policies, even those not required by the law, can protect you from losing vital business assets including key persons and assets.