Tips for Choosing the Appropriate Liability Insurance for Your Business

When it comes to liability insurance, the saying “you can never be too prepared” is certainly apt. While business owners cannot predict what happens day to day or year to year, they can look into purchasing business liability insurance in order to give themselves peace of mind. The first step is to understand why it’s so important.

The Rocky Mountain Insurance Information Association reports that more than one in two home-based business owners lack sufficient insurance coverage. Furthermore, the Independent Insurance Agents of America (IIAA) found that 4 of 10 respondents do not have enough coverage because they believe their homeowners policy covers commercial liability. As you can see, education on this matter is essential. Here are descriptions of several different types of liability insurance from the U.S. Small Business Administration.

General Liability

One of the most common types of liability insurance for businesses is general liability. If the business is a grocery store or restaurant, general liability usually covers customers looking to have their doctor and hospital bills, damaged property or lost wages paid for because they claim they were somehow affected in the course of business operations. General liability also can protect businesses against claims if a third party believes their reputation has been tarnished by written or spoken materials from the company.

Product Liability Insurance

Whether a business makes a product, is a wholesaler or a distributor of a product, or sells the product directly to customers, product liability insurance protects a business against monetary losses if said product is defective and harms the user. Examples of a defective products include a swing with a cracked chain or an over-the-counter medication with a harmful ingredient. The key is that the defective product is determined to have caused the harm.

Professional Liability Insurance

This type of insurance, also known as errors and omissions, protects business owners who provide professional advice or services if they make a mistake or unintended omission in the course of delivery of said services. Examples of this can include a radiologist or one of their subordinates failing to deliver and communicate results of initial and final reports, especially if a medical condition diagnosis has been changed to indicate a more serious problem, and that failure to fully communicate all information leads to preventable medical problems for the patient.

Other examples can include engineers miscalculating combinations of traffic loads on a bridge. If engineers miscalculate the maximum load levels and use incorrect materials and anchors, it could lead to construction delays and/or additional costs to use different materials if a stronger bridge is necessary.

Commercial Property Insurance

When it comes to protecting one’s company against damages to their business’ assets, this type of insurance can reduce the potential financial impact. Policies can and do cover the business owners’ structure from occurences such as fires, hail and wind events, along with property damage due to criminal activity. This type of insurance may cover business assets as well, such as computers, furniture and inventory.

Home-Based Business Insurance

For business owners who run operations from their home, this type of policy can become part of a homeowner’s existing policy. This type of coverage can protect home-based business owners by covering limited amounts of equipment, such as computers, phones and cameras. It also may provide liability coverage for the homeowner if, for example, a client visits and is injured by slipping on steps or tripping over a box.

No matter what insurance policy a business needs, the best way to protect against loss is to reduce risk in the first place. Along with training employees to follow workplace safety procedures, reducing hazards for customers and workers, and reducing the likelihood of accidents, finding the right mix of liability insurance lets business owners focus on growing their business.

Sources

http://www.rmiia.org/business/home_business_insurance.asp

https://www.sba.gov/business-guide/launch-your-business/get-business-insurance