Business Insurance Myths - Misconceptions About Business Insurance
Three Common Myths About Liability and Understanding the Value of Insurance|
The first question often asked by the business owner is: Do I need business
The answer is, “yes!”
In ten years as an attorney, I have always advised my business clients to
obtain insurance for the risks and potential risks facing their business. In
that time I have heard every rationale for why a business owner believes
they do not need insurance. And, before we go on, I want to address the most
common myths that lead some business owners to choose not to secure
Myth #1: Nobody will sue me, my business does not make a lot of
money, and you “can’t squeeze blood from a turnip.” My business is not
FALSE. Everybody and every business can be sued. Everybody and every
business, once a money judgment is rendered against them, can have that
Judgment liens do not “go away”. Judgment liens can be renewed. Wages can be
garnished. Equipment can be seized and sold. Bank accounts and assets can be
seized to pay the judgment. Everybody is collectible at the hands of a
Myth #2: My business is a corporation. The corporate
format protects me from liability, so I don’t need insurance.
FALSE. The corporate format does nothing but protect individual investors,
owners, and officers from personal liability for the actions and debts of
the corporation for corporate purposes. But, under the laws of all states,
the “corporate veil” of protection can be removed – or, “pierced” – under
some circumstances. When that occurs, the owner may be liable personally and
must answer a judgment with personal assets: your house, your car or, maybe,
your life savings. When this occurs varies by state. But, a simple rule of
thumb is that the smaller you are the more likely this will be.
Myth #3: If I die or become disabled, my family and my business
partners are friends and they’ll just work it out.
FALSE. Most small businesses do not survive the death or disability of a
principal member. Most children do not follow parents into the family
business. Most businesses do not have the cash flow necessary to pay the
estate of a deceased member for its interest in the business and the
business may be dissolved. Finally, in my experience, remaining family
members and business partners rarely work things out after the death or
disability of a member.
Once you understand that these myths are simply false, you will be more
secure in your decision to purchase insurance and value insurance as an
investment in your business.
There are other myths that I have run into over the years; but, to
summarize, I have yet to find a business owner with a cognizable reason for
not having insurance. Your business needs to be insured.
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