Here's What Happens When Your Small Business Isn't Properly Insured

If your small business doesn't have the right insurance, a few things can happen -- and almost all of them are bad. Business owners don't love to think about losses and risks and disasters; you got into business because you wanted to build something, wanted to create, wanted to grow.

But business risks are a fact of life. Accidents happen, mistakes get made, and even the most well-intentioned business owners can be vulnerable to misfortune, natural disasters, or an unfortunate lawsuit. The right small business insurance can help protect your company -- and your personal bank account -- from the worst-case scenarios of being an entrepreneur in America.

Let's look at a few reasons why you should double-check your business insurance coverage -- and upgrade your policy if needed, to make sure your business is properly insured.

1. Accidents happen -- liability insurance can help

One of the first types of insurance that every business should get is a small business general liability insurance policy. This can protect your business from situations like "a customer slipping on the icy sidewalk" or "someone tripping down the stairs" and blaming your business.

What happens if you don't have the right business insurance: An injured customer or passerby could potentially sue your company (or you personally) for damages in a personal injury case. Even if the lawsuit is without merit, spending time and money on lawyers and court filings is not most business owners' idea of fun. Small business liability insurance can help defend you in court and protect your company, and your life savings, from a disastrous lawsuit.

2. Protect your business property -- with business insurance

Does your business own real estate or other physical property? What happens if your building burns down or floods, or if your inventory gets stolen, damaged, or destroyed by a natural disaster? Commercial property insurance can help cover the costs of recovering from damage or losses affecting your business property.

What happens if you don't have the right business insurance: You're on the hook to pay the bills. Just like you don't want to go without homeowners insurance or auto insurance, getting the right level of coverage to protect your business property can save you thousands of dollars (or more) -- and help you sleep better at night. Be sure to re-evaluate your business property coverage levels each year, especially as your business grows -- don't outgrow your insurance protection.

3. Keep your business "in business" -- with business interruption insurance

"Business continuity planning" sounds like corporate jargon, something that only the biggest companies need to worry about. But more small business owners need to dedicate some time and effort to thinking about "BCP." Ask yourself:

• What happens to your business if a tornado hits your building tomorrow?
• What if your computer systems get hit by a cyberattack?
• What if something terrible happens that keeps you from opening your doors to customers?

These kinds of disasters and disruptions are examples of when you need business interruption insurance. This type of insurance can help replace your business income in case you're not able to be open for business and generate revenue -- it's also known as "business income insurance."

What happens if you don't have the right business insurance: Cash flow is the lifeblood of any business, and without the right business insurance, you could be left to recoup all that lost revenue by yourself. If you can't get your business operations back to normal, this could be devastating. Not having business interruption insurance could make your business's next interruption permanent.

Bottom line

Even if you have several months' worth of cash reserves in your business bank account, no business owner wants to have to cover the massive losses of a lawsuit, a natural disaster, or a prolonged disruption to business operations. Getting the right small business insurance can help save you from the worst-case scenarios. Don't face the risks and losses of life all alone. Check your small business insurance coverage and keep protecting yourself, your family, and your company as your business grows.