What Is Insurable Risk? A Quick Guide for Startup Entrepreneurs

With over 30 million small businesses in the United States, it’s essential you do everything you can to keep your company running strong so you can stay ahead of the competition.

One of the ways to do that is to protect your business, employees, and assets through insurance.

Although it may seem difficult to understand the ins and outs of the insurance business, it’s important to do so for the sake of your business. Keep reading to learn more about insurable risks so you can keep your company safe.

What is Insurable Risk?

For a risk to be considered insurable, it has to have these key elements:

Measurable Loss

If you can’t measure a loss, there’s no way to insure something. This is because the insurance company needs to be able to place a definite monetary value on things.

Unintended and Unexpected

Another aspect of insurable risk is that it has to be random. For example, if a building burns down after a lightning strike, there’s no way to predict that.

However, if an owner burns their own business down, that’s intentional and expected. This is why insurance companies investigate situations like this to make sure an accident is truly an accident.

Predictable Chances

While an accident has to be completely random to be insured, an insurance company has to be able to calculate the probability of an event happening. This is done by using existing statistical data.

Non-Catastrophic

There are two ways insurance companies define catastrophic risk. The first way is by the number of businesses affected and the other is by a large monetary loss.

For this reason, it’s difficult to get insurance for things like hurricanes, earthquakes, or nuclear fallouts that can affect large amounts of property and often completely wipe them out.

If you are concerned about catastrophic events, there are some insurance companies that specialize in it.

Large Loss Exposure

Insurance companies function because there are large numbers of people paying into them with only a fraction of them making claims.

For that reason, a risk has to be applicable to a large number of other businesses that are also willing to pay to protect their businesses against the same risk.

Types of Business Insurance

Let’s quickly look at a few of the types of insurance that most businesses will need to have to completely cover themselves against all types of insurable risks. Here are six types of corporate insurance options:

• Professional liability insurance
• Product liability insurance
• Workers’ compensation insurance
• Business interruption insurance
• Property insurance
• Vehicle insurance

To get coverage, you can go through a traditional insurance company, or consider using a captive insurance company which can have some benefits compared to other options.

Want to Learn More Ways to Improve Your Business?

Now you know what an insurable risk is and have some ideas as to what your options are for protecting your company against those losses. Having insurance should be part of your risk management.

If you want to learn about more ways you can improve your business, keep reading our blog. It’s packed with information that can help any type of business grow.