Small businesses are an integral part of our country. They provide goods, services and jobs for our communities. They’ve also faced some particularly challenging times in recent years. May 1 through May 7, 2022, is National Small Business Week. This is the perfect time to honor the small businesses in our communities – and to make sure we’re protecting small businesses.
Small Businesses Fuel Our Communities
A single small business might not be big on its own, but together, small businesses are mighty.
The U.S. Small Business Administration says that there are 32.5 million small businesses in the country. That’s 99.9% of all businesses. About 61.2 million people are employed by small businesses in the country, and nearly half of all U.S. employees work at small businesses.
It’s Been a Challenging Time
Without small businesses, our economy would suffer tremendously. Unfortunately, it’s been a challenging time for small businesses.
The COVID-19 pandemic has hit small businesses hard. Many businesses were forced to close in 2020, and some were never able to reopen. According to a report from the Federal Reserve, it’s estimated that during the first year of the pandemic, there were about 200,000 more small businesses closures than would have been expected in a normal year.
Some businesses have also had to deal with a rise in devastating natural disasters. In 2021, NOAA says that there were 20 weather and climate disaster events with losses totaling more than $1 billion. These fires, floods, tornadoes, hurricanes and storms impacted many small businesses, and some likely didn’t survive.
Manmade disasters can be just as much of a risk for small businesses. A 2021 report from the FBI’s Internet Crime Complaint Center shows that the country experienced “an unprecedented increase in cyber attacks and malicious cyber activity.” There were 847,376 complaints with losses totaling $6.9 billion, up from $4.2 billion in 2020. Business email compromise and ransomware schemes have been especially devastating for businesses. In 2021, there were 19,954 reports of business email compromise schemes, with losses totaling $2.4 billion.
Many Small Businesses Don’t Survive
Many small businesses operate on thin profit margins. They simply don’t have the funds on hand to cover major unexpected expenses. FEMA says that about 25% of businesses do not reopen after a disaster.
At the same time, entrepreneurs are determined. According to SCORE, small business formations have been increasing in recent years, and the pandemic did not stop this trend. In 2019, there were 3.5 small business startups. In 2020, this number surged to 4.4 million, and in 2021, it surged again to 5 million.
Small business owners clearly have the drive to succeed. They also need the right protection.
Increasing the Odds of Survival
FEMA says that having an emergency disaster plan and a continuity of operations plan can help businesses recover after a disaster. These plans should cover many elements, including strategies for communication and evacuation, as well as steps to protect key physical assets and records. The Small Business Administration has checklists and safety tips for a variety of disasters, including cyber incidents and weather events.
Insurance is one critical part of emergency planning that small businesses should not overlook. FEMA advises businesses to check their insurance policies to confirm that they have enough coverage.
Insurance Coverage for Small Businesses
Because small businesses have a variety of risks, they may need multiple insurance policies. These policies may be bundled into a Business Owners Policy package or sold as standalone coverages.
Here are some of the coverage types that small business owners may need:
- Commercial Property Insurance: This coverage protects your property from fire, theft and other covered perils. Flood and earthquake insurance are typically offered separately.
- Business Interruption: This coverage is often offered as part of a commercial property insurance policy and protects your business against disruption and lost income caused by a covered peril.
- Commercial Auto Insurance: Robust commercial auto insurance can be critical. If you or your workers drive personal or rented vehicles, you may need hired and non-owned auto coverage.
- General Liability: This important coverage provides protection against third-party claims of property damage and injury.
- Cyber Liability: As cyber exposures surge, this protection is increasingly important.
- Errors and Omissions: For many businesses offering professional services, this coverage offers important protections against claims of negligence, misrepresentation or inadequate work.
- Workers’ Compensation: If your business has employees, you may be required to carry workers’ compensation insurance under state law.
Is your small business covered? Here at Heffernan, we are passionate about protecting small businesses. We can create a tailor-made insurance package for your small business. Learn more.