Small Business Liability Insurance

Whatever be the size and nature of a business venture, it should be protected by business liability insurance. This article briefs you on the various types of small business liability insurance.
Studies show that around 80% of all businesses in the U.S. are either sole proprietorships or business partnerships. Operating any kind of business requires accountability and responsibility. There are many risk factors involved in running a business venture. Whether it is a partnership or sole proprietorship, the business owner needs to assess the risks involved and take precautionary measures. One of the ways an entrepreneur can protect his business is by purchasing a business insurance.

A business liability insurance is a type of insurance that is specifically designed for protecting small businesses from some of the risk factors such as a lawsuit, property damages or an accident to an employee or a client on the premises of the organization. There are various types of business liability insurances that a business owner can choose from to protect his small business venture.

Types of Small Business Liability Insurance

General Liability Insurance: General liability insurance is popularly known as Commercial General Liability insurance (CGL). This business liability insurance is usually purchased as a part of business owner's policy. CGL insurance can be purchased as a separate policy if a business owner feels it is necessary to protect the company from property damages, injury claims and advertising claims. However, before purchasing a general liability insurance, a business owner should identify the risk factors that are associated with his business.

You should be familiar with the terms insurer and the insured. An insurance company is an insurer, while the business owner is the insured. In case a client files a lawsuit against the firm, the insurance company covers the general liability and the business owner has to meet the legal expenses incurred. For instance, if the company is insured for $2 million under general liability insurance and a client sues the firm for $2.5 million. Then under General liability Insurance, the insurer (insurance company) will pay $2 million and the business firm would have to pay the remaining $50,000. To avoid a situation where a business owner ends up paying a large amount, many of the small business owners purchase umbrella liability insurance that provides coverage to completely protect the business firm.

Professional Liability Insurance: This liability insurance is also known as 'errors and omissions' liability insurance. Professional liability insurance is mostly purchased by professionals such as a doctor or lawyer, who run their own business. Here the professional has to purchase professional liability insurance in addition to the business owner's policy. Professional liability insurance would protect the business owner against any financial losses, if a client files a lawsuit against the service provided. Many states in the U.S. allow doctors to practice only if they are covered by professional liability insurance.

Product Liability Insurance: Small scale manufacturing units and importers of any kind of products can purchase a product liability insurance. This liability insurance would protect your business, in case a person is injured using a product manufactured by you. Even if the product is not manufactured by you but has the name of your firm on it, the injured person can file a lawsuit against you and your firm. Product liability insurance would also protect your firm if a client or the end user files a lawsuit against you for manufacturing defect or design defect in your product.

How to Buy Small Business Liability Insurance

A small business owner should search for a business liability insurance that offers him a maximum coverage at favorable premium rates. He should take into account the risk factors of his business, while purchasing a business liability insurance.

It is beneficial to understand and get a good perspective of various small business liability insurances. Update yourself with the current happenings in your industry. You have to take a close look at and also review the recent legal actions and settlements in your business field. This would give you an idea regarding the type of liability that suits your business. You can purchase the small business liability that suits you best after reviewing the industry research.

Buy all your business liability insurance from one company, else you pay may have to pay higher premiums. Depending on the type of business you operate and the liability and risk involved, consider purchasing an umbrella liability policy as it provides maximum protection.

A small business owner should find an insurance broker who specializes in his type of business and industry. The insurance broker would be able to brief you on the coverage and rates that suit the nature of your business.
By Maya Pillai
Bouquets and Brickbats