Sometimes, though, it’s tempting to question the value of insurance because it is an intangible product. Let’s back up and take a big-picture view of why insurance matters. Here are seven reasons why insurance is important.
When you look at your industry, you see the “big guys” and the “small guys.” If a risk goes wrong, the big guys will be able to survive. They can take a hit. But the little guys can’t take a hit. As a result, they are more risk averse, and in some cases, they sell out to the big guys. If enough little guys leave the industry (and one big guy swallows them up), you’re left with a monopoly. With insurance, however, the little guys have support if they want to take a risk, which means they stick around longer. What it comes down to is that insurance helps prevent monopolies from forming.
Insurance is a safety net for when risks go wrong. Life insurance can support the life of a family, should a member be lost. It’s similar for a business. Should a key member or piece of equipment go out of commission, the business can carry on, thanks to insurance. This reason why insurance is important dovetails nicely with peace of mind. It all goes back to the idea that insurance, when activated, makes policyholders whole again.
Insurance, an intangible, provides another intangible: peace of mind. Business owners can take on certain business ventures because they can shift the risk — thanks to insurance. This reason is the counterpart to — lenders require insurance. Insurance is the required safety net (by lenders) that lets entrepreneurs explore opportunity.
Mortgage lenders want proof of insurance before you buy or build a new building. In short, to get the money your business needs to keep going, it’s likely you enjoy the benefits of insurance. Without insurance, your winning business model can’t get the funding it needs to take its first step, or your established business model can’t get the funding to evolve and better compete.