The first question often asked by the business owner is: Do I need business insurance?
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 insurance.
- 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 collectible.
FALSE. Everybody and every business can be sued. Everybody and every business, once a money judgment is rendered against them, can have that judgment collected. 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 persistent attorney.
- 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.