Nearly a third of small to medium-sized businesses (SMBs) have no form of insurance at all, according to a new study – nor do they have a solid contingency plan in place to mitigate the risk.
According to specialist insurance broker InsuranceBee’s first Annual Risk Survey, 29% of SMBs have no insurance. InsuranceBee surveyed 1,000 small business owners, asking them whether they considered themselves risk-takers, what they felt the main risks to their business were, and whether they had made any contingency plans to mitigate those risks.
While 93% of survey respondents cited financial risk as their biggest concern when setting up a business – and 47% saying economic uncertainty kept them up at night once that business was established – a surprising number of SMBs had no form of insurance – no errors and omissions, no general liability, not even workers’ compensation insurance.
“Insurance policies are not ‘nice-to-haves’ – they’re essential for small businesses,” said Maureen Brogie, senior advisor for InsuranceBee. “Without insurance, if someone makes a claim against them, all the blood, sweat and tears that went into building their business could just go to waste. For most, if not all, this should be a risk that’s simply not worth taking.”
Many SMB owners seem to be employing a “fingers-crossed” strategy, InsuranceBee said – merely hoping nothing will go wrong. Twenty-seven percent of SMBs have cash put aside to mitigate risk, but a third of those had made only a rough estimation of how much they need.
The survey also found that sole proprietors and those earning less than $50,000 per year were most likely to have no business insurance.
“Micro-business owners and sole proprietors with no form of insurance are putting their income at risk on a daily basis,” Brogie said. “Without this safety net, a single claim made against them could destroy their business overnight.”
