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Insurance and Risk Management for Small Business Owners

Many small business owners truly believe that when they have a proper and comprehensive insurance

program for their business, they will be “fully protected” from financial losses. Setting aside the

grey areas on the fine print of most insurance policies, there are many losses that insurance cannot

be extended.

Some of the such losses that small business suffered after occurrence of accident; are lost of goodwill to customers due to failure to deliver merchandises on time; lost of faith from employees for not

providing a conducive working environment, and many more losses which do not have financial impact

initially but gradually translate into financially losses.

While insurance is important in indemnifying small business owners in case of fire damaging their

properties and/or accidents that causing injuries and loss of life thus downtime in productivity,

small business owners should practice risk management in order to create a more sustainable business

and have a competitive edge over their competitors to minimize their lost time hence cost.

The basic methods of risk management are

1.Avoidance of Risk

Simple procedures and things that most small business owners took for granted can have huge impact

when they resulted in accident. Always practice the maxim of “prevention is better than cure.”

2.Reduction of risk and losses

Be aware of the consequences of risk and accident, develop a loss prevention or reduction system to

minimize the occurrence of risk and losses when risk happened.

3.Transferring of Risk

Transfer the risk to other parties like insurance company.

4.Keeping of risk and absorption of losses.

If transfer of risk is not possible, you may have to absorb some of the risk and/or losses. Some of

the insurance policies require the insured to bear a portion of the losses term as deductible or


Arranging a comprehensive insurance cover for small business is crucial for the survival, many small

businesses have overlooked or ignored the important of a proper coverage for their business, when

accident happens, they found themselves in a financial distress and thus losing their customers to

their competitors.

It is thus advisable to seek professional advice for a proper insurance coverage and more importantly practice good risk management.