The Importance of Small Business Liability Insurance

Liability insurance is an important business protection policy that provides financialcoverage for the legal costs of defending a lawsuit. It also helps cover medicalexpenses resulting from bodily injury and property damage arising from thebusiness operations.Depending on your risk profile and the type of business you run, liability premiumscan vary greatly. This is why it is important to review your policy carefully and getan accurate quote. 1. General Liability General Liability Insurance is one of the most common forms of business insurance,and it’s an important part of any small-business owner’s portfolio. This policyprotects your company from claims of property damage, medical expenses, andlegal fees if a customer, vendor, or other third party is injured on your premises.The minimum level of coverage you need varies by industry, customer demand, andcomfort level. For example, businesses that sell or rent out buildings or occupy landoften carry high liability limits in the range of $500,000, $1 million, or $2 million.A deductible is the fixed out-of-pocket expense you agree to pay before yourcoverage starts pay. The deductible can be as low as $250 on a $1 million limit CGLpolicy. General liability also covers other risks that aren’t typically covered by other typesof business insurance, including advertising injury and libel, and slander. If abusiness’s advertising or marketing practices infringe on copyright or trademark, forexample, they could be sued for libel or slander. 2. Professional Liability If you provide professional services, such as financial advice, accounting,consulting, or legal services, you need professional liability insurance. This policyprotects you from claims of negligence, malpractice, errors, or omissions in yourwork.This coverage can help you pay the costs of defending a claim and payingjudgments against you up to your policy limits. It also covers legal fees anddamages for non-financial losses, such as licensing board penalties.The most common types of professional liability insurance include occurrence andclaims-made policies. Occurrence policies provide coverage for claims filed duringthe period of the policy, while claims-made policies offer coverage for claims filedafter the end of the policy.AdvisorSmith reviewed the ratings of several insurers to identify those that have thebest financial strength, customer satisfaction, and ease of use. Those factors arethe most important to consider when choosing an insurer for your professionalliability insurance. 3. Employers’ Liability If you work in a high-risk industry like construction, insurance, or food service, it’simportant to have liability insurance. This type of coverage helps to protect yourbusiness from the costs and claims of employee lawsuits, including workplaceinjuries, illnesses, and deaths.This type of coverage is typically packaged with workers’ compensation to cover thefinancial expenses that are associated with workplace injuries and illness. It alsocovers the legal costs that an employer incurs in defending against employeelawsuits, such as discrimination and sexual harassment.Employers’ liability insurance is not mandatory in all states, but it is a good idea topurchase this coverage for your company. It may be required by law, and it can helpprotect your business from costly litigation.Many businesses opt to purchase employers’ liability insurance as a stop-gapmeasure to bridge the gap between workers’ compensation and general liabilitycoverage. This coverage is especially critical in states that require businesses topurchase workers’ compensation through state funds, which do not allow them tobuy it from private insurance companies. 4. Automobile Liability Liability insurance is one of the most important coverages to have, as it helpsprotect you if you cause an accident. It covers the cost of repairing or replacingsomeone else’s property or injuries. Each state sets a minimum amount of liability coverage, but it’s usually smart to buymore than the required minimum. Higher limits help you avoid paying out-of-pocketif you hit a car or cause other damage.Besides liability, drivers should consider getting personal injury protection (PIP) andmedical payments coverage. These types of policies can cover medical expensesfor you and your passengers, regardless of who’s at fault in an accident.Some states also require uninsured motorist coverage, which pays for yourexpenses if you get into an accident with a driver who doesn’t have enoughinsurance to pay for the damages. These policies can be costly, so you’ll want tocompare quotes carefully. 5. Products Liability Product liability insurance is a vital part of any business that sells products orservices to the public. Regardless of the product, there is always the chance that itwill malfunction and cause bodily injury or property damage to consumers.A faulty design, an error in manufacturing or importing, and a failure to provideinstructions for use are all potential risks that can lead to product liability claims.Even the most meticulous manufacturers can face a lawsuit if a defect is discoveredin their product.This can result in lost profits, damaged reputations, and millions in awards andlegal fees. And many clients, landlords, retailers, and marketplaces will not workwith a company that does not carry adequate product liability insurance.Fortunately, most businesses have product liability coverage through theircommercial general liability policies. However, it is advisable to shop around for thebest policy. You can do this by comparing several quotes from different insurancecompanies. In addition, be sure to check the financial strength of the insurers youare considering. 6. Crime Liability Crime liability insurance protects your business from loss resulting from theft,embezzlement, forgery, and other crimes. It’s often included in package policies,but can also be purchased stand-alone.If you aren’t sure whether you need a crime policy, ask your insurance advisor for arisk assessment to determine which types of coverage you need. It’s important tonote that most commercial crime policies are written on a named perils basis, soonly those incidents and costs specifically listed in your policy will qualify forcoverage.You may also want to consider adding employee dishonesty and social engineeringfraud coverage, which covers losses resulting from the fraudulent inducement ofemployees, such as by phishing scams and impersonation schemes.Chubb is one of the top providers of commercial crime policies and offers excellentcoverage options for small businesses. However, its extensive list of services andpolicy benefits means that it tends to be more expensive than competitors. 7. Business Owners’ Policy (BOP) A Business Owners’ Policy (BOP) is a package of insurance policies that cover mostof the risks a small business faces. It provides business property and liabilitycoverage, along with business interruption insurance.It can also include crime, vehicle coverage, and flood insurance. It is generallymore affordable than buying a set of individual insurance policies.Businesses that do not qualify for a BOP may need to purchase a variety ofindividual policies, depending on their risk profile and specific needs. For example,a large restaurant with a complicated insurance portfolio would most likely benefitfrom purchasing several individual policies that would tailor their coverage to matchtheir specific risks.A BOP is designed for small businesses and usually does not make sense for largercompanies that have more complex insurance needs. The best way to determinewhether or not your business is eligible for a BOP is to gather basic informationabout it and get a quote from an insurer. It can take just a few minutes to assemblea quote that will help you identify the insurance package that is right for you. 8. Umbrella Liability Umbrella insurance provides liability coverage over and above the limits of yourhome, auto, or boat insurance policies. It may cover a variety of liability claims,including bodily injury and property damage.It can also cover lawsuits from libel, slander, or defamation of character. It can helpyou avoid paying huge financial judgments that could bankrupt you if a claim is filedagainst you.Some people are more susceptible to liability than others, so it's worth consideringwhether or not an umbrella policy is right for you. This is particularly true if you ownor rent out the property, engage in a particular lifestyle, have household staff, or area public figure.Adding umbrella insurance to your existing policies will raise your rates, but it canbe well worth the extra expense for peace of mind. It's worth shopping around tofind a reputable insurer that offers this coverage at a competitive rate. 9.conclusion Liability insurance is a type of insurance policy that protects against claims of injuryor property damage. These policies generally cover medical expenses, legal costs,and settlements.General liability is one of the most important types of business insurance in the US.It provides coverage for lawsuits resulting from accidents and workplace incidents,including car crashes and slips and falls. It can also cover infringement onintellectual property, slander, libel, and other claims. In addition, it may providecover for product liability.