Business liability insurance is a very touchy subject with most entrepreneurs as the reasons why it is absolutely necessary are unfortunately also negative. Perhaps a staff member acted inappropriately towards a customer, or a customer was burned by hot water accidentally splashed on them. It’s never a pretty picture.
Still, no matter what the reasoning, business liability insurance is essential for every entrepreneur. This article discusses your insurance options and gives an indication as to how much is enough for your business.
Types of Business Liability Insurance
There are basically only four types of business liability insurance:
- General Liability Insurance: This type of insurance covers general costs and damages in case someone decides to sue your business because of something that happened either on the premises or by using one of your products or services.
- Employers’ Liability Insurance: Similar to general liability, but specifically for employees who decide your business is negligent such as with a wage discrepancy, hours worked and some work-related accidents.
- Automotive Liability Insurance: This type of insurance covers anyone who may drive a company vehicle while working and is injured, injures someone else, or damages the vehicle.
- Professional Liability Insurance: The final type of insurance isn’t for every business – it’s usually only for companies that are considered professional in nature, such as lawyers, doctors or the media.
Reasons to Have Business Liability Insurance
The most important reason to have business liability insurance isn’t to sue someone else because of damages to the company (i.e. slander in the public eye), but to defend the business against lawsuits. Even if nothing ever gets as far as court, the costs can bankrupt a small business quickly.
Additionally, a small business has a higher chance of being sued than the Big Box retailers do. Most individuals won’t or can’t go up against the large chains, but won’t blink an eye in our litigious society if its the mom and pop shop next door.
How Much Business Liability Insurance is Enough?
In the simplest terms possible: as much as your business can afford.
Unfortunately, business liability insurance rates have skyrocketed over the past couple of years because of a variety of factors, many having to do with the attacks on 9/11. This only makes it more difficult for a lot of entrepreneurs to afford business liability insurance that covers at least three of the issues listed above. But can you afford not to?
To mitigate this problem somewhat, add to your calendar a list of all of your insurance policies, and when they are due on a yearly basis. Post a reminder at least two months in advance before your coverage is canceled, so that you have ample time to research other options and compare business liability insurance plans.