RMI - Business Insurance Basics [LESSON]
Business Insurance Basics
In this lesson, we will learn about the various types of business insurance and why insurance is essential.
Business Insurance | Knowledge Point
Business insurance is like a safety net for your company. It shields you from unexpected risks and financial losses. Read below to find out how insurance coverage helped CrestThreads overcome a serious threat to the business.
CrestThreads operates a warehouse where it stores its inventory of t-shirts, hoodies, and accessories. One evening a fire broke out at the warehouse causing significant damage to the building and a portion of the inventory. The fire posed a substantial threat to CrestThreads leading to inventory loss, a disruption in operations, and financial losses. Fortunately, CrestThreads had invested in comprehensive business insurance coverage, which included property insurance and business interruption insurance. The property insurance policy covered the cost of repairing or replacing the damaged property, including the inventory lost in the fire. The business interruption insurance policy covered the cost of lost revenue and additional expenses that were incurred during the interruption period. The fire was devastating to the business owners and employees, however, thanks to the insurance coverage, CrestThreads was able to recover from the incident with minimal financial loss. By having the necessary insurance coverage in place, CrestThreads can effectively manage unexpected threats to its business, safeguarding its financial stability and ability to bounce back from unforeseen events.
Why do businesses need insurance?
Insurance is essential for managing risks and ensuring that a business can survive when faced with challenges. Click each tab to learn more.
Liability Protection
What is it?
Imagine a customer slipping and getting injured in your store. General liability insurance covers legal costs and medical bills in such situations.
Introduction to Insurance | Video
Watch the short video below to learn more about insurance. As you watch the video, answer the following questions:
- What is insurance coverage?
- How do insurance providers operate to pay for emergencies?
- Explain the concept of pooling risk.
- How do insurance providers adjust their premiums?
OER Source: Red Canoe Credit Union “Intro to Insurance. Links to an external site." Used according to terms of use.
Types of Business Insurance | Knowledge Point & Activity
Before signing up for business insurance, business owners should assess their business’s major risk factors. Then, they should research the various types of business insurance to understand what each covers. Review the image below to learn more about the various types of business insurance.
How does business insurance work?
After assessing potential risks to a business and researching the types of business insurance that might be needed, a business owner can then sign up for insurance coverage. Here is how it works:
- Business owner signs up for appropriate business insurance coverage
- Business owner pays an insurance premium
- Business eventually experiences an event that can be covered by the insurance
- Business receives compensation based upon the terms of the insurance policy
In order to understand how insurance works, you must have a good understanding of the terminology. Explore the learning object below to review common insurance terms.
Insurance Terms | Practice Activity
Click each term to learn the definition.
Business Insurance Matching | Self-Assessment
Put your learning into practice by matching the business scenario to the appropriate business insurance.
Reflection
Insurance is essential for managing risks and ensuring that a business can survive even when the unexpected happens. Although insurance cannot remove potential threats, it can provide peace of mind and financial security, allowing business owners to focus on more important things like the success of their business and overall success!
Considering what you have learned in this lesson regarding business insurance, what other types of insurance do you think CrestThreads might need to best protect the business?
[CC BY-NC-SA 4.0 Links to an external site.] UNLESS OTHERWISE NOTED | IMAGES: LICENSED AND USED ACCORDING TO TERMS OF SUBSCRIPTION - INTENDED ONLY FOR USE WITHIN LESSON.