What is the need of Financial Loss Insurance?
Business-insurance solutions intend to provide security to business-owners. For people who run a business it is crucial to have financial security, and it can be very useful to find some kind of financial loss solution. Financial Insurance may be the key-factor in this sense.
Business owners are particularly aware of the importance of covering their business against possible financial losses. However, as each business differs a lot from the other, there is no a single solution. Similarly, a certain type of business is quite different from another from the point of view of risk-exposure. Therefore one thing that each businessman can do is to analyse his/her business, identify the major financial risks that the business carries, and after that, find an appropriate protecting-policy. In order to be successful in this, the above-mentioned sequence of events should be made very carefully.
Moreover, if a businessman feels he cannot implement such a strategy alone, he should ask an insurance professional to help him in implementing the plan.
It is obvious now that implementing the insurance-strategy should be based on the possible risks affecting one’s business. Similarly, these risks are crucial in the sense that if they really occur, they can have disastrous consequences, and there is a possibility that the business cannot survive the unforeseen events. Therefore developing an appropriate level of financial loss coverage is essential. Minimizing such risks is also one of the objectives of insurers who help by implementing such preventive-strategies that can minimize the chance of such disastrous events.
What does Financial Loss Insurance cover?
For instance, it protects a business against loss of sales or failure of major financial-investments. It also provides coverage for natural catastrophes that result in inability to carry out the planned business-tasks in time. Financial Loss Insurance also helps in those situations when a creditor fails to pay back the insured’s money. Finally, it also offers a so-called liability-insurance option, which takes responsibility for businessmen’s actions. In one word, this insurance-type will provide coverage in all cases when the business needs to be interrupted due to a third party, or due to objective reasons that are independent from the business-owner.
What are the costs of this insurance-product?
This obviously depends on the type and the expansion of the coverage, and also on the type of the business-in-question and the risks it carries. The insurance-premiums will be based on the expected costs of possible losses (claims) as well as the costs of issuing the policy.
Next, in order to make a successful assessment regarding how much and what kind of cover is needed, here is a list of elements that should be checked:
- What are the main financial risks affecting the business?
- How is the business performing at the present moment? What are the future prognoses?
- What would be the result of an investment failing to bring into fruition the expectations referring to its profitability?
- Are there any risks connected to creditors or employees?
- What are the effects on the business’ performance if a key person dies?
- What are the costs of training a replacement?
- What is the effect of the delay regarding the replacement’s contributions to the business’ profits?
- Does this delay influence the business’ performance in a large proportion?
Here is an outline of the major Financial Loss Insurance options in order for businessmen to know their way about these products. The following risks may be covered: any kind of business-interruption, loss of profits, machinery-breakdown, or creditors’ insolvency. Moreover, there is a particular option that covers any kind of third-party crime, for instance: employee dishonesty, fraud, copyright or e-business malpractice, computer-crime (such as hack- or virus- attacks), or robbery. Commercial or political risks may be covered as well, and there exists an insurance-option which protects against personal-injury, or theft of business-related money.
Finally, a business might be protected even against loss of license. This option is useful mainly for hotels, motels, or public-houses that could lose a lot of money in case their premises do not get a certain license, or if their license is not renewed by the specialized authorities. One of the most important options, though, is the one called partnership-protection that covers against the company-director’s death or critical illness.