Can insurance really help my small business?

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Blessing Chuks Okonta

Small businesses are widely recognised as the engine of economic growth, yet they remain the most exposed to risk. From fire outbreaks and theft to accidents, lawsuits and sudden business interruptions, a single unexpected event can bring years of hard work to an abrupt halt. This reality has raised a recurring question among entrepreneurs: can insurance really help a small business?

In Nigeria’s challenging business environment, small and medium-sized enterprises (SMEs) operate with limited financial buffers. When losses occur, many businesses struggle to recover because they lack the capital needed to restart operations. Insurance is designed to fill this gap by providing financial protection against defined risks.

Insurance helps small businesses manage risks that could otherwise lead to permanent closure. Policies such as fire and special perils insurance, burglary insurance, motor insurance, employer’s liability and public liability cover are structured to compensate businesses for losses arising from unforeseen events.

Without insurance, replacing damaged equipment, lost stock or destroyed premises often falls entirely on the business owner. With insurance, these losses can be transferred to the insurer, allowing the business to recover more quickly.

Beyond claims payment, insurance supports business continuity. Business interruption insurance, for example, can help cover ongoing expenses such as rent, salaries and utilities when operations are temporarily halted due to insured events.

Industry practitioners note that many small businesses fail not because the initial loss was severe, but because they could not survive the period of disruption that followed. Insurance helps bridge this critical gap.

Insurance also plays an important role in improving business credibility. Insured businesses are often viewed as more reliable by landlords, lenders, suppliers and corporate clients. In some sectors, proof of insurance is a prerequisite for securing contracts, licences or financing.

For growing businesses, insurance can therefore support expansion by opening doors to partnerships and opportunities that would otherwise be inaccessible.

Despite its benefits, uptake of insurance among small businesses remains low, largely due to cost concerns and fear of unpaid claims. Insurance professionals advise SMEs to focus on covers that address their most significant risks rather than opting for broad, expensive policies.

They also stress the importance of dealing with licensed insurance companies and engaging professional insurance agents or brokers to ensure proper policy selection and smoother claims processes.

Insurance may not prevent losses, but it can prevent losses from becoming catastrophic. For small business owners navigating uncertainty, insurance should be viewed not as a luxury, but as a strategic tool for survival and long-term stability.

As awareness continues to grow, experts believe more entrepreneurs will come to see insurance as an essential part of responsible business management.