Why insurance?
Are your staff and customers safe? Can these people work around your organization with confidence and trust?
Or haven't you considered it yet, probably you don't know what insurance in business mean.
See, nobody is a prophet, If you say you are, you can't be spiritually inclined all the time to predict what is going to happen next.
Can you predict if someone gonna fall off the staircase in the next 30 minutes?
I guess not, right?
In the same way, you can't predict when an accident will occur next, can you?
That's why you don't have to gamble the precious lives of your clients and staff.
You are the vehicle's driver, and the passengers' lives are in your hands.
You need to drive them safely and lead them in a risk-free direction.
According to the LinkedIn article,
One can do everything right, just as one of my clients did, but it didn’t stop a bogus multimillion-dollar lawsuit over an alleged injury.
His insurance policy came to the rescue, not to pay the bogus claim, but to hire the attorneys to fight the claim.
Simple allegations take money to fight, and many clients are pleasantly surprised when their insurance policies reap the rewards of an entire legal team to fight frivolous lawsuits.
Had it not been for his policy, he would have been out $20,000+ just in legal bills, and who knows how much more had the case gone to trial.
Imagine if his insurance company didn't show up to rescue him; this man would have paid more.
Or spent months resolving the issue, putting his business at legal risk.
Since you can't control the future.
That's why you need to know what insurance in business studies means.
So,
What is Insurance in Business Studies?
Insurance in business studies simply means a financial model that businesses of all sizes use to protect their assets like staff or property, from damage, losses, and unforeseen events.
Plus, insurance is a contract between a business and an insurance company, where the business pays premiums in exchange for the insurer’s promise to cover specific risks that may threaten the business's operations, assets, or profitability.
How does it work
When you think about insurance, often consider it as a risk management.
People are prone to risk, the bitter truth is that you can't manage the risk.
Even when you act carefully, you don't know what will happen in the next minutes.
That's why you need a protective measure to minimize and safeguard your assets against financial losses arising from unpredicted situations.
Since you can't predict these events because they can stem from a variety of sources.
We have seen how properties are destroyed by natural disasters or economic downturns.
In fact...
We have heard of companies losing their reputation and trust from a little claim such as media defamation.
Either they are charged for copyright or something else they didn't know they did.
Multi-million dollar or Naira companies have been shut down because they lack insurance.
See, insurance helps to stabilise operations, mitigate risks, and help you maintain continuity in difficult moments.
That's why some experts refer to insurance as a risk transfer mechanism.
Instead of bearing the full brunt of a loss, businesses can share the risk with an insurance company.
This way, you pay a premium, and companies enter into a contractual agreement where the insurer promises to compensate for specific financial losses incurred due to various risks.
The reason is simple...
The essence is to pool risks from multiple policyholders.
This allows insurance companies to spread the potential costs of claims across a broad base.
This helps reduce the financial burden on any business, helping them navigate difficult situations without putting their assets at risk.
Let's look at some of the roles insurance plays in risk management.
Risk, in this context, refers to the unforeseen future events and what losses or damage of assets may occur.
As we know, businesses constantly face risks that are either internal(operational inefficiencies) or external(market fluctuations).
Given that no business can predict the future with absolute perfection.
And that's right...
Having an effective insurance plan is one of the most prudent decisions a company can make.
In case you are wondering what types of insurance coverage you need.
Let's take a look at this...
For property insurance,
Every day we hear about buildings collapsing, some businesses and physical shops catching fire and equipments destroyed.
We all hear about this.
That's why I recommend property insurance because it protects your business from losses caused by the damage of physical assets.
Liability insurance, on the other hand, safeguards businesses against legal claims that may arise from accidents, injuries, or negligence.
Since you don't know what may happen next.
Whether a staff or client may sustain an injury that nobody plan.
To save your company from facing lawsuits, you need liability insurance.
For business interruption insurance,
You are compensated for income losses during periods when normal operations are halted, such as after a catastrophic event like a flood or fire.
For companies operating in high-risk sectors, such as manufacturing, construction, or transportation, specialized forms of insurance are often required.
These might include workers’ compensation insurance to cover medical expenses and lost wages for employees who are injured on the job.
Or product liability insurance, which covers claims related to defects in products that may cause harm to consumers.
Don't forget that insurance also plays a pivotal role in helping businesses attract investors and secure loans.
For example, investors and creditors typically require businesses to have sufficient insurance coverage to ensure that the company’s financial health is protected.
The reason is that it enhances the company’s credibility and lowers the perceived investment risk.
Here's the thing...
In the event of a catastrophe, an insured business is far more likely to recover quickly.
And that's true.
That's why investors are interested in businesses that are protected.
Importance of insurance in business
The most well-thought-out enterprises face risks that could threaten their stability or even lead to financial ruin.
If you think you are a small enterprise but don't need insurance.
Think again...
Insurance is not only designed for big corporations, it is designed for businesses of all sizes.
Whether small, medium, or large organizations.
So understanding its importance in your organization is crucial to fostering a well-enabled environment.
If you want your business to thrive in the long run, you'll need insurance.
It saves your assets
No matter how meticulously a company plans its operations, certain risks remain beyond its control.
Can you control a fire disaster? Do you know if someone plans to file a lawsuit against your company?
Are you covered?
Without insurance, all you have built over the years can be destroyed in just a minute.
However, with the right coverage, your business can recover without suffering crippling consequences.
You gain trust and credibility
Customers, investors, and business partners feel more confident when dealing with a company with adequate coverage.
Imagine hiring a contractor to renovate your home.
Would you feel comfortable if they had no insurance?
Probably not.
The same principle applies in business.
Clients are more likely to work with a company that demonstrates responsibility by having insurance.
It shows that the business is not only protecting itself but also safeguarding the interests of those it serves.
It fosters long time game
In the event of unforeseen disruptions, such as a cyberattack, product recall, or employee injury.
A company with comprehensive coverage can continue operations with minimal downtime.
Moreover, insurance is crucial for employee welfare.
Employees are the backbone of any organization, and their well-being directly affects productivity and morale in a company.
If you check the article I wrote about business insurance, you'll understand in depth how it affects your business.
Do you know that the moment you hire employees, even if they are freelancers or independent contractors...
You may be legally required to have employers' liability insurance.
The reason is simple.
Your staff may face a single moment of carelessness, a spilled drink in a cafe, a customer tripping over a loose wire.
Plus, if an employee accidentally damages a client's property, it all but results in lawsuits and compensation claims.
Guess what? It happened to everyone, but we are unaware.
That's why accidents are an inevitable part of life, and businesses are not exempted.
Plus, the relationship with your clients is unpredictable; clients might claim that your services caused them financial loss.
Or that you failed to deliver on your promises, which may lead to legal disputes.
When employees feel secure in their workplace, they are more motivated to perform at their best, leading to increased efficiency and a stronger company culture.
Plus, many businesses hesitate to launch new products, expand into new markets, or invest in cutting-edge technology.
Because of the inherent risks involved.
With the right insurance policies, businesses can make calculated risks.
Knowing that every risk is covered.
FAQ
What is insurance in business studies jss1 & class 11
So, in business studies, insurance is a very important topic because it teaches us how businesses protect themselves from losing everything.
It is like an umbrella that shields a business from heavy rain.
With insurance, businesses can continue to grow, take care of their workers, and serve their customers, no matter what happens.
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