Every business, no matter how big or small it is, is subject to different kind of risks which can straightaway lead to loss exposure. Wondering what loss exposure is? It is any possibility of monetary loss due to damage or financial claim against your small business and you. There is always risk associated with a business and it means the business won’t receive a return on investment. It is an exposure to danger to your bottomline. When you’re in business, you require considering the kinds of events which could pose a risk to your business so that you could take the required steps to solve them and protect your business.
Businesses which analyze the 4 of the most common risk management areas and personalize their insurance policies accordingly have the highest protection against loss exposures. The 4 types of loss exposure faced by small business organizations are income loss exposure, liability loss exposure, people loss exposure and property loss exposure. Read on to know the details of these exposures.
? Income loss exposure: The most common kind of income loss exposures commercial insurance policies are loss of income insurance, life insurance, loss of income extra expense insurance, disability insurance, business interruption insurance and many more. Income loss exposures have a strong impact on the financial flow of a small business. For examples, claims or losses of income might arise from loss of sales, tuition or rent or even due to sickness, injury, loss of employment or some kind of disability.
? Liability loss exposure: This kind of loss exposure stems from accidents or unforeseen events, whether accidental, intentional, criminal or civil. E & O insurance, general liability insurance, employee practices liability insurance, professional liability insurance, directors liability insurance are some of the most common types of liability loss exposure.
? Property loss exposure: Property loss exposures are some of the easiest to comprehend due to the tangible characteristic of the claims. Such type of exposure claims may arise from losses which take place to your building, inventory, automobile, tools, furniture and equipment. If there’s a fire in your office building, it is called property loss exposure. This loss exposure may even extend to intellectual property and the accounts receivable and accounts payable of your small business. Business property insurance, automobile insurance, fire insurance, inland marine insurance are a few of the property loss exposure insurance policies.
? People loss exposure: Personnel and human loss exposures or that which is called people loss exposures usually arise from injuries caused to employees, volunteers or third parties. This kind of loss exposure may involve the possibility of a loss to a small business from some kind of disability, resignation, injury, death and also retirement of employees. Workers compensation insurance, disability insurance, long term care insurance and medical insurance are few of the most common kinds of people loss exposure business insurance policies which are available.
What does direct financial risk for your business involve?
Direct financial risks involve how your business handles money and this includes the decision of which customers your business extends credit to and for how long time. What exactly is your present debt load? Does most of your business income come from only 1 or 2 clients who may even not be able to pay on time? Financial risks also consider interest rates and in case you do international business, then it also takes into account foreign exchange rates.
Therefore, if you’re wondering about how you could keep your business running in the best possible way, you can consider keeping in mind the above mentioned types of financial losses which your business may face and know the right solutions.