When it comes to launching and running a business, entrepreneurs oftentimes find themselves overwhelmed with the massive number of things on their checklist. Setting up a business means ensuring that paperwork is filed, all regulations and laws are followed, and bookkeeping is done to ensure no tax problems.
One very important aspect of launching and running a business is choosing the right insurance. Many entrepreneurs find it difficult to discern which insurance – if any – is actually needed, and there are indeed numerous considerations that are important.
For instance, industry is important when choosing the right kind of insurance. Additionally, whether or not the company offers products is something that needs to be taken into account.
In this article, our friends at Selective Insurance shares the basics of business liability insurance- what it is, why it’s important, and whether or not you really need to invest in it.
What is Business Liability Insurance?
Business liability insurance is a specific kind of insurance designed to protect a business from the costs of damages and legal fees that come with various claims and lawsuits. If you are running a business and have any legal risk at all, business liability insurance is likely something you should be considering.
There are various kinds of business liability insurance available, including general liability insurance, professional liability insurance, and product liability insurance. The different kinds of liability insurance allow a company to pick and choose the coverage tailored to their needs.
Small business in the United States spend more than $100 billion each year on legal issues, and a whopping $35.6 billion per year is spent by small businesses to settle legal claims. Statistics show that the average lawsuit can range from $50,000 to more than $100,000, which is a terrible blow for a small business to absorb.
Thankfully, business liability insurance policies are typically affordable for a small business, especially considering that these policies can save a company from financial ruin.
Types of Business Liability Insurance
There are so many kinds of business liability insurance out there that the only way to find out which one(s) you need is to learn about various policies and what would work for your needs. Here, we’ll outline some of the most popular types:
1. General Liability Insurance
A general liability insurance policy can help cover legal expenses, injuries, and damages if your company is sued for third party bodily liability, property damage, or advertising injury. The cost of this policy is typically less than $1,000 per year and offers $1 million coverage per lawsuit. The cap per year is usually $2 million.
2. Professional Liability Insurance
If you are a professional who works with clients, then this policy could be for you. Professional liability insurance is used to protect you against mistakes or missing deadlines. The cost of this policy will depend on the size and scope of your business.
3. Business Owner’s Policy (BOP)
A BOP is a general liability insurance policy and property insurance policy bundled together that is a great all in one policy for a low risk enterprise.
4. Product Liability Insurance
If your company creates or sells products, having coverage for Products Liability is an excellent choice and can protect you in the event of a product malfunction.
5. Worker’s Compensation Insurance
This type of insurance policy protects employers and employees from expenses due to injuries on the job.
6. Commercial Umbrella Policy
This kind of insurance policy protects you in the event that your other insurance policy incurs an overage by covering the gap.
The first step in choosing the right liability insurance for your company is to take a look at your industry, whether you are offering products or services, the number of employees you have, the location of your business, what kind of property and equipment used on-site, and the length of time in business. Likewise, these are the factors your insurance will take into consideration.
I’m Ready! How to Get Started?
Once you’ve decided which insurance you’re interested in, there are a few routes you can take to get your business insurance coverage policy started. One way is to use an insurance agent or broker. Another route is to talk directly with an insurance company. Lastly, you can use an insurance marketplace to help find the right policy for your needs.
The question of whether or not you need a business liability insurance policy should definitely be answered with a resounding “YES!”. These policies are relatively inexpensive in comparison with how much they can save you in just a single claim or lawsuit. In the U.S., the costs of these policies can also be written off at tax time. With the right insurance policies on your side, you can conduct business with peace of mind.