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A Quick Guide To Insurance

Everything you always wanted to know about business insurance - but weren't afraid enough to ask.

Just being in business is risky. Beyond the most important risk--whether people will buy enough of your product or service to allow you to make enough money and grow--are a number of risks that could send any entrepreneur searching for a dark hole to hide in.

A fire could destroy your inventory, office equipment, records and building. A flood could cause thousands of dollars' worth of damage. Your business could be vandalized or robbed. A customer could sue you for an injury he or she suffered while on your property. A disgruntled employee could sabotage your computer system. You could be the target of an extortionist or a terrorist. The list of potential catastrophes businesses face is virtually endless.

When dealing with risk, you have three reasonable choices: eliminate it, accept it or shift the responsibility for it. Your other option is to pretend it could never happen to you. Anyone who has dealt with a business-related loss would be quick to explain the foolhardiness of this last approach.

In most cases, when you can't completely eliminate a risk, you'll use a combination of accepting and shifting to manage it. In insurance language, that's known as the deductible. Typically, the higher the deductible, the lower your premium. It sounds like a numbers game, and it is--but it's a very serious one that needs careful consideration.

In this quick guide, we take a look at business insurance to help you determine what you need, what you already have, and what could happen if you're not careful.

Jacquelyn Lynn is a business writer in Winter Park, Florida.

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: A Quick Guide To Insurance.

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