4 Risks of Running Your Business Uninsured
By Laura McElroy

Owning and running a business comes with a number of internal and external risks. Events within and beyond your control may translate to hefty financial costs. Having insurance might not prevent a vehicle accident, natural disaster or other unfortuitous event. Should you gamble on being an entrepreneur without insurance, these events can debilitate your finances and operations. Here are four risks of operating a business without insurance.

The High Cost of Replacement

Fires, storms, earthquakes or other calamities can deplete your business of its infrastructure equipment, supplies, space and inventory. Events such as electrical shortages, lightning strikes, a sudden split or hole in the plumbing or a cyber attack may trigger these losses. Without property insurance for your business, the replacement costs can prove staggering or even prohibitive.

Should you borrow to replace, expect to be saddled for many years with interest costs. Even the new equipment, buildings and inventory take time to be constructed and placed into service. This translates to often lost months of sales and other revenue sources to remain profitable.

Liability Claims

Your business may engage in a number of activities that pose a risk of lawsuits and judgments. You or your employees may face claims of careless driving, selling or distributing defective products, negligent advice or performance of services, faulty conditions on your premises, to name a few. The victims of negligent acts may suffer significant property, financial and personal injuries.

If you operate as a sole proprietor, you stand personally liable for tort claims or judgments. In most states, you can protect only a certain amount of your property from collection. This could put possession of your home, vehicles or other personally-owned items in jeopardy. While operating as a corporation or limited liability company prevents your personal exposure to liability, the entity cannot avail itself of property exemptions. Without liability insurance, the business assets may be liquidated and your operations likely will cease or be interrupted for extended periods of time.

Fines, Prosecutions and Other Legal Sanctions

Your jurisdiction likely requires workers’ compensation insurance on your employees. Associated Insurance Professions find for employers workers’ compensation coverage that pays medical bills and lost wage benefits for employees injured in the course and scope of their employment with you. Your business faces fines, lawsuits by injured employees and criminal prosecution if you fail to carry workers’ compensation insurance.

Many Business Doors Closed

Contractors and others in the construction sector carry insurance that covers injured employees or third parties and damage to property. In fact, project owners, such as businesses or government agencies, typically require companies bidding on or performing on the project to have such insurance. The contract documents specify the minimum amounts and types of coverage. Construction companies may be required to secure payment bonds to guarantee payment of subcontractors and suppliers or performance bonds to guarantee their own work. If you do not have insurance or these bonds, you will find yourself disqualified for many of these jobs.

Depending on the state, those in certain professions must have malpractice or errors and omissions insurance to compensate victims of professional mistakes. States that do not require this insurance may nevertheless require practitioners to disclose the presence or absence of malpractice insurance. Should you not have a malpractice policy and that fact is made public, you stand the risk of scaring away potential clients.


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