Every company, especially small ones and start-ups, should be covered for any possible risks such as lawsuits, damages, or even injured employees.

liability insurance for small business policy

What Is Liability Insurance for Small Business?

An insurance policy is issued when establishing liability insurance for a small business. This policy has the role of protecting a company from a number of risks. However, a potential risk has to be written into the insurance policy in order for it to be later covered.

Usually, liability insurance for small businesses will make payments, if necessary, to a third party claim. This means, that the money goes directly to cover the damage or the loss that someone suffered because of the small business’ activities.

Liability insurance for small businesses does not cover things such as contractual liability or intentionally caused damages. Every time a claim appears the company that offered the insurance has the obligation to defend the small business that is insured.

In most cases of liability insurance for small business, the insurer has the following obligations: defending the insured company, indemnifying the small business, and settling reasonable claims. Indemnifying means that the insurer has to pay the needed amount of money covered by the insurance policy.

Main Types of Insurance Recommended for Small Businesses

  • General liability insurance. This type of insurance is the primary subject of this article. Every business, big or small, is obliged to have this insurance policy. This specific policy covers your defense as well as all potential damages caused by you, your company, or even by your employees, to a third party.
  • Property insurance. This kind of insurance comes in handy should your assets be subject vandalism, fire, or any other kind of damage. This insurance can also help you protect your revenue when your company is unable to work properly.
  • Professional liability insurance. This is also called the “Errors and Omissions Insurance.” Professional liability insurance completes the general insurance policy in case your business has failed to properly offer its services.
  • BOP. Business owner’s policy offers you all the coverage that any proprietor needs. This type of coverage includes liability, property, and crime insurances. Furthermore, this type of insurance costs a lot less than those previously described.

Things You Need to Know About the General Liability Insurance for Small Business

This is also known by the name of Commercial General Business Liability. Besides the fact that having this policy helps you protect your company’s assets, with this insurance you will also make sure that all your duties are paid. These payments are covered by your insurance policy and go to a number of obligations such as medical costs.

Furthermore, having liability insurance for your small business also helps you to cover your legal defense expenses. Also, if you are a tenant and you are responsible for damaging a property, your insurance policy will also take care of this kind of liability. Moreover, other things such as copyright infringement and misleading advertising are also covered by a general liability insurance for small businesses.

No matter how safe you think your business is, the wise thing to do is to get insurance. There are two ways to get a liability insurance. You can either buy it on its own, or you can purchase a bundle coverage. In the case of this second option, you will need to get a Business Owner’s Policy. This combines liability with property insurance into a single insurance policy.

Your liability insurance for small business includes certain coverage aspects and scenarios, depending on your type of company as well as the potential risks associated with this kind of business. Another thing that influences your insurance policy is the location of your company.

Benefits of  Liability Insurance for a Small Business

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  • Reducing costs. Usually, if your company is involved in a case that goes to trial, you will need to pay large sums of money. Your company will save a lot of money when you have a liability insurance. When dealing with a trial, your business has plenty to lose. By having insurance, you will make sure that you do not pay all the costs from your company’s pocket.
  • Avoiding unnecessary lawsuits. Even if you do everything by the book, sometimes, there are certain clients that will find something wrong with the way you sell your products or services. Hiring a lawyer will cost you a lot of money. Therefore, getting liability insurance will cover these potential risks.
  • Protecting yourself from real claims. There are cases in which a trial is based on true and relevant facts. When this happens, you face huge costs when it comes to hiring a good attorney and going through the trial. Being a small business, you cannot afford to pay thousands of dollars, if you actually lose the trial.

Proof of your professional status. Having liability insurance will give you more confidence as a business. Furthermore, your clients will see you as a trustworthy company. Some key customers might even ask you to show them a guarantee of your coverage policy.

How Much Is Liability Insurance for Small Business?

Depending on your type of business and what kind of liabilities your policy covers, an annual insurance cost is situated between 750 and 2,000 dollars. This price can be looked at from different perspectives. However, it is a lot less compared to the amount of money you would have to pay in the case of a trial. The price mentioned above is within the average limits.

However, there are cases in which the amount of money that you have to pay for your insurance is lower than that. For example, if you are a sole proprietor you will only have to pay 500 dollars each year. On the other hand, more complex companies, such as a consulting business, will have an annual fee of at a minimum 3,000 dollars.

In conclusion, getting liability insurance for your small business is crucial for your company’s successful functioning and growth. It not only covers some of the potential risks but it also increases  clients’ level of trust regarding your services.

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