Oh, business owners absolutely do. When you run a small business, you interact with the customer to some extent and this means protecting yourself with insurance.
Although costs vary by type of operation, the benefits of business insurance far outweigh the costs. And liability insurance coverage helps you protect your business. There are many types of business insurance products, making liability insurance a basic necessity for small business owners.
Let’s see how liability insurance and general insurance provide protection.
What is Small Business Liability Insurance?
There are two basic types of liability insurance, liability and general liability insurance. Business owners may need one or both types:
- General liability insurance – General liability insurance is general business insurance. General liability coverage protects your business if a client or visitor is injured at your place of business. General liability insurance also provides protection against damages you cause while doing business. For example, you are a contractor and you break a customer’s window when you raise your ladder. General liability insurance will protect your business from claims for reputational damage (someone claims defamation or slander) and publicity damage (someone is harmed by your brand’s claims).
- Liability – Liability coverage is often referred to as errors and omissions insurance. It protects against errors in the service provided. For example, you are a financial planner and the investment portfolio goes south. Or you are a couples counselor and someone believes you have given bad advice.
What Businesses Need Liability Insurance?
You may need both general liability insurance and liability insurance.
You need general liability insurance to run a business. Without general liability coverage, you leave yourself open to lawsuits related to your products and are not covered for property damage you cause or accidents that occur to a visitor to your business. If a salesperson or visitor has a slip/fall injury on your business premises, you are not covered.
You may need both types of business insurance if you provide professional services. Here is an example: You are an accountant. One of your tax return clients slips on the wet floor of your office bathroom, tearing his ACL. This is where general liability business insurance comes into play.
He provides advice to a tax return client, recommending a different approach to handling depreciation of instruments to reduce taxes. Two years later, the client hears from the IRS. Your advice was incorrect and the client owes taxes. This is where liability coverage will provide coverage.
What Does General Liability Insurance Cover?
Here’s a straightforward explanation of what small business owners need to know about general liability insurance coverage.
Medical Expenses
Standard liability insurance policies will cover you if a guest or client is physically injured at your place of business. A person’s medical bills can be astronomical, and a client’s injuries can include medical expenses as well as court costs and attorney’s fees – an obvious reason to carry general liability insurance.
Property Damage
If you go to a client’s property to do work, your liability policy will cover you if you cause damage to the property. For example, you are a landscaper and you cause structural damage when a rock falls off the mower, or you run over a row of hydrangeas. Either way, you damaged someone’s property while performing the services, and you are legally responsible.
Legal Defense Costs
One of the highest payouts an insurance company pays in a typical liability claim isn’t for physical injuries – it’s for legal fees. For example, a toilet injury/fall to a client’s ACL causes stress and loss of income. In addition to seeking reimbursement for medical expenses, the client wants more money. Your general liability policy will cover legal defense costs, including legal fees and related costs.
Personal Injury and Advertising
General liability business insurance covers you if someone claims your product has been promoted by false advertising. For example, you sell a mattress ‘guaranteed to reduce back pain’ and someone says it didn’t work.
Personal injury claims come from someone who believes they have defamed or defamed their business. For example, you operate a food truck and one of your employees tells a customer that someone else’s food truck business does not maintain hygiene standards.
What Does Professional Liability Insurance Cover?
Errors and Omissions
This is comprehensive coverage and protects you from a general liability claim for negligence, misrepresentation, or breach of good faith.
As you can imagine, these are standard policies and claims often involve legal fees. Your insurance company will cover defense costs including legal fees, settlement/judgment amount (up to what is set in the policy), and administrative costs (such as document preparation).
What Does Business Liability Insurance Cover?
Now that you know what is covered, you need to know what is not covered by this type of small business insurance:
- Commercial property insurance – Your general liability will cover you if you damage someone else’s property, but to protect your business premises you need a commercial premises, which protects your building and business property. You may need commercial premises insurance even if you operate out of your home – unless you can get a “rider” on your homeowner’s policy to cover your business. You need commercial space and even leased premises.
- Commercial vehicle insurance – Yes, you need a separate commercial policy to cover the vehicle or vehicles you use for business purposes.
- Work compensation – If you have employees, you need a separate workers’ compensation policy. In this age of subcontractors, many small business owners are choosing to purchase workers’ compensation policies that cover temporary and/or part-time employees, even 1099s.
- Cyber Security – Many insurance companies choose to add this to their liability coverage or offer it as a separate policy. For example, you may be able to get a Business Owner’s policy that includes general and/or professional liability coverage, as well as cyber security. Cyber security is necessary for all normal business operations where customers’ personal data is required as part of doing business. It is one of the most overlooked and necessary small business insurance products.
Small Business Credit Insurance Costs
How much does a standard loan cost? Insurance costs vary depending on the specific business and the amount of business income. It may also vary with your chosen coverage limits. If you choose an insurance company that offers umbrellas, such as a business owner’s policy, it will lower your cost of general liability insurance.
Typically, you can expect to pay as little as $29 per month for basic business liability insurance.
Small Business Credit Insurance Costs
Rates vary from one insurance company to another. Business liability insurance varies by business type and annual income.
Typically, you can expect to pay as little as $20 per month for basic coverage limits.
How to Choose the Right Liability Insurance for Your Small Business
Before getting general liability insurance or liability insurance, talk to a legal professional about setting up your business as a limited liability company. By forming an LLC, you can gain financial security by separating your business assets from your personal assets.
Here are some tips for the small business owner:
- Network with other small business owners
- Shop online. With just a few clicks, you can start viewing quotes.
- Shop in person.
- Get a general liability insurance quote and a liability quote if needed, and compare.
- Carefully consider the deductible. With any claim, your rates will increase. Is it better to have a large deductible – intending to pay for damages and not make a claim? How much can you pay out of pocket?
- Rate your quotes.
- As a last resort, call the customer service line you can use to make a claim. See if you can handle the wait.
Best Small Business Credit Insurance
Every business owner needs general liability insurance. Many require liability insurance.
We’ve selected companies that offer both. These companies also offer a Business Owners Policy or BOP, which can help you save money by combining policies under one umbrella.
These companies also provide internet insurance and other insurance products. For example, Progressive offers commercial auto insurance.
Hartford
Hartford offers many types of additional insurance products, and can also provide financial advice.
State Farm
State Farm offers riders on homeowner’s policies for many home businesses. If you have established your own business from home, you can save money by purchasing a rider instead of a separate policy.
NextInsurance
NextInsurance is the go-to for contractors and builders looking to set up an instant policy. NextInsurance also offers daily, weekly or monthly term policies.
Biberk
Biberk Insurance is a favorite for subcontractors working on third party sites. Biberk offers many insurance policy options.
What’s going on
Progressive is known as an auto insurance company but offers many types of business insurance. Since it offers both general liability and commercial auto insurance, you may be able to save money by using the same carrier to get both types of insurance.
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