In the worst case, a single accident can lead to a financial catastrophe for a business without the right coverage. Therefore, from accounting to recreational rentals, every company must be insured against damage relevant to the industry.
If you're planning to start an outdoor adventure business and wondering what insurance you might need, this article is for you.
Why do businesses need insurance?
For entrepreneurs who take care of safety and have not suffered any significant damage, insurance is unlikely to be the most soul-stirring topic of discussion. However, every business needs insurance. It's a cost of doing business and a mandatory part of risk management.
When an accident occurs, and over a long period, it is more likely than not, insurance protects your personal and business assets. In the worst case, insurance can save not only your business but also you as a person from bankruptcy.
Whether you run an accountant's office or a water sports business, you must have insurance. The accountant is glad they have insurance when someone slips and falls at the office. However, accidents are far more likely to happen in water sports, mountain biking, or climbing than in an accountant's office.
So let's see which insurances are required for businesses and which are recommended.
The types of insurance businesses are required to carry
As a business owner, you have to carry some types of insurance. But which types are required? The requirements vary from country to country and state to state, but the risks and insurance types are relatively universal. So, always check with your local authorities what's required and recommended. The following sections will introduce the most common insurance types for companies providing outdoor activity services.
According to the US Small Business Administration (SBA) website, the federal government requires every business with employees to carry:
workers' compensation insurance
and disability insurance
Recommended insurance for recreational businesses
There are several types of insurance businesses should have in addition to the ones required by law. The key here is to identify the risks involved in your industry. As a general rule of thumb, protect yourself from things you can't afford to pay for.
General liability insurance
General liability insurance is recommended for every business. This insurance policy covers injuries and property damage from normal business operations, including a wide range of issues.
For example, if a customer falls off a bike they have rented from you, your general liability insurance will cover any bodily injury and damages to the bike.
Commercial property insurance
Commercial property insurance is highly recommended for companies that possess a significant amount of property and physical assets. Several outdoor companies can check this box as they have a lot of money tied up in expensive equipment.
This insurance covers the loss of the business's property and assets caused by natural disasters, theft, or vandalism. For example, if you have a recreational rental company and rent kayaks to people who never return the equipment, commercial property insurance will cover this loss. Another example would be a fire in your store, leading to the loss of property and inventory. Commercial property insurance will cover this as well.
Product liability insurance
Companies that manufacture, wholesale, distribute, or retail products need product liability insurance. It protects businesses against financial loss due to a defective product that causes an injury to its user.
Suppose a business gets sued for damages because of a defective product. In that case, the product liability insurance policy will pay for the legal costs, including any settlements or judgments against the business.
Business income insurance
Business income insurance is an essential type of insurance for business owners. While commercial property insurance covers the damages to the physical property, business income insurance protects business owners from the loss of business income if their business is slowed or suspended due to damage to physical property.
Workers' compensation insurance
Workers' compensation is insurance that an employer purchases to provide benefits to employees who are injured or become ill as a result of their job. The benefits may include salary replacements and health care cost reimbursement. Workers' compensation insurance is mandatory in many countries and states.
Data breach insurance
Data breach insurance is designed for a problem we didn't have before the 21st century. You may think this isn't a problem for small businesses, but unfortunately, you're mistaken. A lot of data breaches occur with small businesses whose processes or lack of know-how make them vulnerable to cyber threats.
A data breach is an event where an external party illegally obtains access to large amounts of data personally identifiable data. As an outdoor experience business, you must store your customers' personal information, such as credit card details, contact information, and sometimes social security numbers. This makes you vulnerable to data breaches. Data breach insurance can give you substantial protection liability when a breach occurs.
Commercial auto insurance
Commercial auto insurance protects businesses that use vehicles for commercial purposes. This can include everything from delivery vans to cars used for sales or service calls.
Commercial auto policies typically offer more coverage than personal auto policies, which may be required in some states for certain businesses. While the exact coverage will vary depending on the policy, most commercial auto policies will provide protection for liability, physical damage, medical payments, and other losses.
Commercial auto insurance is essential for any outdoor activity company relying on vehicles to conduct their operations.
Commercial umbrella insurance
Commercial umbrella insurance provides extra protection if a claim exceeds your other policies' cover. Basically, it's complimentary to your other liability coverages.
The most common adventure sports business risks
There are as many types of outdoor activities and adventure sports businesses as you can imagine. From kayak and bike rentals to wilderness snowmobile tours, ski schools, and scuba diving companies—the list is endless. It doesn't take a genius to understand that these activities carry a higher than average risk of physical injury in addition to other risks.
You and your employees are expected to meet a reasonable standard of care for your customers even though you make sure all your customers sign an airtight liability waiver. Apparent lapses in the standard of care could lead you to be held liable even though the customer signed a waiver and thus has assumed the risk.
The following are some common examples of the lapsed standard of care:
You or your employees failed to repair, maintain, or replace equipment as necessary. For example, let's consider a bike rental company. If a biker gets into an accident because the brakes don't work, you're liable for the accident.
You or your employees failed to ensure the customer had an appropriate skill level for the activity. For example, failing to check that the customer has the proper certifications for the activity in question. This is the case, for instance, for scuba diving.
You or your employees failed to supervise an activity where appropriate. Say you're in the ski school business—your employees must adequately supervise the customers on the slopes. Failure to supervise could lead a court to hold you liable if there's an accident.
Your staff isn't qualified, or their certifications aren't in good standing. For example, with certain water sports activities, the guide might be required to be a certified lifeguard.
There are many unique risks depending on the activity. As an entrepreneur, in addition to identifying risks as comprehensively as possible and creating an environment for safe activity through your processes, it is vital that you have valid insurance. Despite all the precautions and care taken, accidents can always happen.
In addition, damage to your and your customers' property and assets should be carefully identified and adequately prepared for.
Checklist before buying insurance
To help you make sure your business insurance package is adequate, we've listed a few points we recommend you go through before rushing to buy the insurance.
Do you have friends who are entrepreneurs? In particular, people you know in a similar business will be able to tell you what kind of insurance you should get and at what price. After all, insurance salespeople are like anyone else whose interest is in selling as much as possible to their customers.
Find out which insurances are compulsory and which are voluntary in your industry. Also, consider what insurance you need now and what you can view later as your business grows.
Work with an insurance agency that specializes in coverage for outdoor businesses and adventure sports companies. They understand the particular liability exposure your company has. They'll have a better feel for exactly how much insurance coverage your business needs and can provide customized policy coverage for your company. You can find and compare highly rated insurance agencies using sites like Trustpilot, for example.
How to Manage risks beyond the insurance
Outdoor recreation insurance isn't your first line of defense when managing risks. Your first line of defense is your company's safety policies. Princeton University provides an excellent resource for developing your safety policies. Once you have a safety policy, the next step is to implement it.
Implement a strict safety policy across your company
The first step is to educate your staff. Your employees must know exactly what the safety policies are and the consequences of not following the procedures. You simply cannot afford to keep an employee that continuously disregards safety policies.
The Occupational Health and Safety Administration (OSHA) provides materials to help you implement safety programs. Although OSHA didn't have adventure businesses in mind when they created these guides, the general guidelines can help develop your safety program.
OSHA advises that you do the following things when implementing a safety program.
Make sure your employees understand that safety is a top priority.
Lead by example. Make sure you practice what you're preaching when it comes to safety.
Implement a reporting system. Ensure employees report close calls and hazards that must you must deal with.
Provide safety training. Your staff must thoroughly understand the safety policies and continuously educate themselves. You must ensure your team is qualified for the responsibilities you entrust to them and ensure they have any certifications they need to perform their jobs.
Conduct inspections. Inspect the equipment you're renting out. Observe the employees when they're on the job with your customers. You need to know that everyone is following the safety protocols.
Ask your employees about any improvements they recommend for the safety program.
Assign employees to carry out different aspects of the safety program. Have other employees review their work. Make sure the employees understand safety is a team effort. Everyone has to do their part to make sure the safety program works.
Address emergency scenarios beforehand and develop instructions on how to act in each scenario.
Consult your staff before making any significant workplace changes, whether related to processes, equipment, or other factors affecting safety.
Keep improving your safety program. There's always room for improvement. Find your program's weaknesses and fix those issues.
Secure your equipment with a security deposit
When renting equipment to a customer, it's essential to protect yourself from potential financial loss if the equipment is damaged or lost while in the customer's possession.
One way to avoid this scenario is to require a security deposit. The deposit gives you financial protection if the equipment is damaged or lost. Of course, you'll need to return the deposit to the customer when they return the equipment in good condition. But if there are any problems, you can use the deposit to cover the cost of repairs or replacement.
In this way, a security deposit can help you avoid financial losses if your rental gear is damaged or lost. With Rentle Payments, you can charge security deposits automatically at the checkout and release them when the booking ends.
Outdoor adventure businesses face many potential risks, from injuries to customer damage to equipment. As a result, it is essential that outdoor sports and adventure businesses have sufficient insurance coverage in place.
Outdoor adventure insurance can help protect businesses from the financial consequences of accidents and other events beyond their control. Without insurance, companies could be forced to shoulder the entire cost of repairs or medical expenses, which could quickly bankrupt them. In addition, insurance can help businesses recover from disruptions caused by natural disasters or other catastrophic events.
While insurance is a crucial safety net, it should always be a last resort because it only pays out after something bad has happened. That's why it's essential to take preventive measures to reduce the chances of an accident or damage occurring in the first place. This includes things like safety protocols and procedures, employee training, and customer screening. By taking these precautions, you can help reduce the likelihood that you'll need to file an insurance claim. And if an incident occurs, these measures can help minimize the damages.