Entrepreneurship is a risky plunge. According to leading global markets analysts, Bloomberg, “8 out of 10 entrepreneurs who start businesses fail within the first 18 months.” This inherent risk in starting and operating a small business can be equated to a gamble, which amounts to putting your money and life on the line in order to be successful.
From the inception of their business, entrepreneurs expose themselves to certain risks that are enough to wipe out years of hard work and millions of Naira worth of investments. In Nigeria, SMEs are even more prone to suffer these risks, given the harsh economic and policy environment. Sadly, there is little or no safety net for promoters, when faced with business threatening scenarios.
Interestingly, the adoption of insurance (one of the surest ways to protect businesses from sudden financial losses) by SMEs in the country still remains low as only about 35% of small businesses are insured.
Why does your business need insurance?
Running a business with only an optimistic mindset can be disadvantageous, as the risks that threaten the existence of enterprises are forever lurking in the corners. Whether it is a catastrophic event that wipes away your assets or a damaging lawsuit, to mention just a few, failing to protect your business against risks leaves the promoter at the mercy of fate. But here is how insurance provides succor.
Insurance for founders and employees
At the initial growth stage of a business, the loss of a member of staff, especially key personnel, can affect your SME. However, with Life Insurance, Workers’ Compensation Insurance and Critical illness insurance policies, the organization is saved the burden of providing unplanned compensation or bearing the cost of unplanned medical expenses or lawsuits that might follow a deadly workplace accident. Even if you run a business that performs low-risk mechanical or electrical operations, slip and fall injuries could result in expensive legal claims.
Meanwhile, it is worthy of note that every SME with more than three employees is mandated by law to have insurance in place, to cover risks that may arise from employees’ death, disappearance, disability, or critical illness while in service.