When times are tough, many business owners believe that no expense is too sacred to be spared from the cost-cutting axe. The cost-containment craze of the 21st Century promises to be more than a passing fancy -- it will remain a key to survival in an increasingly competitive global market. Still, business owners, particularly of small and medium sized businesses, should take great pains to ensure that their insurance programs are not compromised.

A business owner`s need for adequate insurance protection can be greater than the insurance needs of an employee. And while people whose paychecks are signed by someone else quite naturally have similar concerns as their employers: protection against financial loss that can be brought on by death, disability or insufficient retirement funding, when the employer is hit by these same circumstances -- everyone can suffer.

Think of the many insurance situations that can impact both a business and its owner. Most employers don`t think twice about securing property and casualty insurance. These coverages include auto, property and fire insurance. Other business owners wouldn`t think twice about neglecting liability and other commercial insurance -- necessities for a business when one lawsuit can close it down. The protection afforded by this type of insurance is easily understood.

It`s on the life and health side of the insurance coin that many employers have a hard time understanding the consequences. Most business owners fully understand the basic principles as they apply to individuals, but what about the effect insurance -- or lack of it -- can have on a workplace?

Insurance is most critical in areas that can`t be predicted," says Leta Finch, director of the Vermont Insurance Institute. "Many employers are naive when it comes to assessing risk in the workplace."

When a business goes through a rough time, the employer feels the pain most acutely. But business owners shouldn`t fool themselves: it affects employees, too. When a business suffers, employees feel the stress -- a leading cause of health problems and disability. As these problems mount -- causing loss of experience, expertise and man-hours -- the business suffers even further.

Cutting benefits only adds to the stress. Morale can suffer, and more often than not, quality and customer service go downhill, too. Perhaps an employer`s rationale is that jobs are scarce and employees have no place else to go. That`s short-sighted -- the availability of qualified workers is as cyclical as the economy. What happens when the employment market opens up again?

Providing employees with access to adequate insurance is one way employers can make a lasting impression on a workforce, while even maintaining or improving morale. And insurance can help to ensure the success of the business in other ways. When employees are disabled, they can recoup most of a lost paycheck through disability income coverage, and the business probably won`t suffer. Likewise when a business owner becomes disabled, a disability income policy can help restore lost income. But what about the business? This is where a Disability Overhead Expense policy comes in, providing additional benefits for business owners to help them defray ?fixed? business expenses (such as rent, utilities etc) that must be paid regardless of whether the business owner can work. Life insurance can also be used as a means of attracting and keeping qualified personnel, and it can also be used to fund buy-sell agreements.

When employers find insurance premiums hard to take, Finch suggests another step they can take to contain costs. "Although risk assessment and management is quite common in property and casualty insurance, it is quite foreign to us on a personal level," she says. "Personal risk management often comes only from very tragic lessons learned in life. Clearly, if risk management principles are applied to the disability and health side of insurance, we can prevent many things from happening, and we can do it affordably.

Business owners buy many kinds of insurance for one reason -- protection against potential loss. Bad economic times don`t normally change those reasons, or a business owner`s need for insurance.