Why Small Businesses Need Liability Insurance
As a small business owner, you have many responsibilities on your plate, from managing finances to interacting with customers. However, one of the most important tasks that often gets overlooked is purchasing liability insurance. Many small business owners do not realize the risks they face and are not adequately insured, leaving them exposed to financial danger in the event of a claim or lawsuit. This article discusses why liability insurance is important for small businesses and outlines scenarios where it is necessary.
Facts and Figures
According to a report by the Insurance Journal, 90% of small business owners are not confident that their business is adequately insured. Nearly 30% do not have any insurance coverage and over half admit that their business is not prepared for potential risks. The biggest barrier to buying insurance is a lack of knowledge, with 53% of small business owners stating that they do not know what types of insurance they need.
Scenarios That Require Liability Insurance
1. Interacting with Customers
No matter where customers interact with your business, there is always the potential for injury to occur. It could be something as simple as a slip and fall or as unpredictable as a customer choking on a piece of candy. In either case, liability insurance can protect you from financial risk.
2. Visiting a Client’s Property
If your business takes you to a customer’s home or workplace, you could accidentally damage their property. For example, while replacing a window, your ladder could slip and break another window. General liability insurance can help you cover the cost of repairs or replacement.
3. Employing Someone Else
If you hire someone to work for your business, you are setting yourself up for potential legal trouble. If an employee gets fired and files a lawsuit, you could be charged with anything from sexual harassment to wrongful termination. Employment practices liability insurance can help you cover the cost of legal fees.
4. Using Copyrighted or Trademarked Words
Using copyrighted or trademarked words, even by accident, can result in a lawsuit. General liability insurance can help you pay any court costs associated with a lawsuit.
5. Bidding on Jobs That Require Liability Insurance
Some jobs require liability insurance before you can bid on them. If you want to grow your business and take on more significant contracts, you need to have liability insurance.
6. Selling Products That Could Result in Personal Injury
If your business sells products, you need to think about the worst-case scenario. Could your product harm someone? For example, could someone cut themselves on an object or accidentally swallow a small part? Injuries and death can happen in strange ways, so it’s essential to be prepared.
7. Invoicing Clients
If you make a mistake on a customer’s financial statement and they get penalized at tax time, they can sue your business. Professional liability insurance can help you cover the cost of legal fees.
Types of Liability Insurance
The three most common types of liability insurance for small businesses are overall responsibility, professional responsibility, and employer liability. Overall responsibility covers any accidents or injuries that occur on your property. Professional responsibility covers any mistakes or negligence that could result in a lawsuit. Employer liability covers any legal issues that arise from employing someone.
Why You Need Liability Insurance
Liability insurance is essential for small businesses because it can protect you from financial risk. Without it, you could face significant legal fees and potential bankruptcy. Liability insurance is not as expensive as many business owners assume, and it is worth the investment for the peace of mind it provides.
Additional Piece – Tips for Purchasing Liability Insurance
Now that you know why liability insurance is important for small businesses let’s discuss tips for purchasing it. Here are some factors to consider:
1. Research
Research insurance providers and compare prices to find the best deal. Look for companies that specialize in small business insurance and have experience in your industry.
2. Determine Your Needs
Consider the specific risks your business faces and tailor your insurance policy accordingly. Insurance needs can vary depending on your industry and the size of your business.
3. Understan the Policy Terms
Make sure you understand the terms of your policy, including coverage limits, deductibles, and exclusions.
4. Consult an Agent
Consult an insurance agent for expert advice and assistance in selecting the right policy for your business.
5. Review the Policy Regularly
Review your insurance policy regularly to ensure that your coverage remains adequate as your business grows and changes.
Summary
Liability insurance is crucial for small businesses to protect against financial risk. Many small business owners are not adequately insured, leaving them exposed to legal fees and potential bankruptcy in the event of a claim or lawsuit. Scenarios that require liability insurance include interacting with customers, visiting a client’s property, employing someone else, using copyrighted or trademarked words, bidding on jobs that require liability insurance, selling products that could result in personal injury, and invoicing clients. The three most common types of liability insurance for small businesses are overall responsibility, professional responsibility, and employer liability. When purchasing liability insurance, it’s essential to do your research, determine your needs, understand policy terms, consult an agent, and review the policy regularly.
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Key points
- Most small business owners don’t know if their business is adequately insured.
- Nearly a third of all business owners do not have insurance coverage.
- Lack of liability insurance leaves a small business owner exposed to financial risk.
As a small business owner, you have learned to keep many platters spinning simultaneously. After all, it’s often up to you to get things done. If you haven’t already, one of the things you may want to address is purchasing liability insurance. Before you say no, read this article to find out why you might need it.
Does this describe you and your small business?
According to the Insurance Journal, 90% of small business owners aren’t quite sure if their business is adequately insured. Almost 30% of business owners say they do not have any type of coverage and 51% admit that their business is not prepared for potential risks. Finally, 53% of small business owners say their biggest barrier to buying insurance is this: they don’t know what types they need.
if your the business is at home or have a dedicated building, take a look at these scenarios. If any apply to you, you should have liability insurance.
1. You interact face to face with customers
No matter where you interact with a customer, there is the potential for injury to occur. It can be something as simple as a slip and fall or as unexpected as a customer taking a piece of candy from a bowl on her desk and choking on it. In either case, coverage can protect you from financial danger.
2. Sometimes you visit a client’s property
If your small business takes you to a customer’s home or workplace, general liability insurance could help you repair or replace anything accidentally damaged. Let’s say you’re replacing a window in a customer’s home. Your ladder slips and another window breaks. General liability has you covered.
3. You have someone else working for you
If you hire someone else to work for your small business (even part-time), you are setting yourself up for potential legal trouble. For example, if an employee doesn’t show up regularly for work or makes costly mistakes and gets fired, he or she could come back with a lawsuit. The lawsuit can charge you with anything from sexual harassment to wrongful termination. If you are sued, employment practices liability insurance can help you pay legal fees and avoid cleaning up your business checking account.
No matter how original you think your advertising is, the saying “there’s nothing new under the sun” is true. There are few chances to use words or phrases that no other company has used before. When you get in trouble is when a phrase is copyrighted or trademarked.
If you use copyrighted or trademarked words, even accidentally, the copyright or trademark owner can sue you. General liability insurance can help you pay court costs.
5. You want to bid on jobs that require liability insurance
If you’re growing your business, you no doubt know that some jobs require you to submit an offer, and those jobs typically require you to carry liability insurance.
Let’s say you have a landscaping business. You never felt “big” enough to insure it, and you’re worried about the cost of liability insurance. Now, you’ve heard that your city is looking for a new landscaping company to care for the green spaces downtown. The job would change everything from how much money you’ll make to how many people you can hire.
The time to get liability insurance is before you need to get a job. Ideally, everything will be in place before the bidding begins.
6. Your product could cause personal injury.
If your business is selling a product, think of any way that product could harm a person. For example, could someone cut themselves on the article? Is it possible for a child to swallow a small part? Could it catch fire?
Injuries and death sometimes happen in strange ways. For example, in 2011, a 34-year-old woman died after a night of dancing. It wasn’t her dancing that killed her. A pathologist determined that she likely died from a reaction to the glue used to apply her hair extensions.
In 1941, American novelist Sherwood Anderson died while on a South American cruise. While eating the olive in his martini, Anderson is believed to have swallowed a piece of toothpick. As the fragment passed through his system, it damaged his organs and caused Anderson’s death.
No matter what product you sell, imagine the worst that can happen.
7. Invoices to clients
Let’s say you normally trust your accounting program, but you make a mistake on a customer’s financial statement. If, at tax time, the client must pay a penalty because of that error, he can sue his business. Professional liability insurance will help cover legal costs, leaving you with more money to take care of business.
The three most common types of liability insurance for small businesses like yours are:
- Overall responsibility
- professional responsibility
- employer liability
If you’re putting off because you’re afraid of how much insurance coverage might cost, call a insurance agent that deals with trade policy. You’ll be surprised how little peace of mind costs.
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https://www.fool.com/the-ascent/small-business/articles/why-your-small-business-needs-liability-insurance/
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