What Small Businesses Should Know About Liability Insurance

When you think about starting a business, insurance is probably at the bottom of the list of things you are excited about. Putting out a new product, marketing, being your own boss, and growing to success. Comparatively, insurance is boring and often complicated. 

However, it is also a very important aspect of your business. If you don’t have the right insurance, you could face devastating financial hardships from lawsuits, liability, and other risks. It is just as important as all of the exciting things because without it your business could find itself in deep trouble. However, it can also be difficult to navigate for those who are not familiar or fully understand what it does and how it helps. Here is a guide to what small businesses should know about liability insurance. 

Every Business Carries Risk

You might think that you have the safest business possible. You work from home, do not have in-person clients, and you rarely leave your “office” for work purposes. You might think that you can skimp on your insurance because you don’t have much risk. While it’s true that you don’t have much risk, you still do have risk. 

For example, if you provide advice or services for clients, then you could face professional liability. If you are a freelance writer and miss a deadline, one of your clients might miss out on revenue they may have gotten from a publication or from one of their clients. They may decide to bring a lawsuit against you to recover those losses. Professional liability insurance, also called errors & omissions insurance, can protect you from the legal costs and possible damage award from such a situation. 

General Liability Doesn’t Cover Everything

When you first purchase your small business insurance, you might think that general liability will protect you from anything that might come your way. Unfortunately, this is not quite true. General liability tends to cover things that happen on your property or as a result of actions by someone associated with your business. It could be a slip and fall on your premises, or an employee could damage someone’s property. 

However, general liability would not cover the freelance writer example above. Nor would it cover if one of your products causes injury or damage. For those coverages, you would need professional liability insurance and product liability insurance. Of course, what type of business you have will dictate what kind of insurance you need. Make sure to get liability coverage that is appropriate for your business. If you run a maid business, then get house cleaning insurance. If you are a restaurant owner, then get restaurant insurance. 

You Have No Control Over Other People

As a small business, you can have a lot of control over your workplace and how you do business. If you have a small staff, you can handpick people who do things safely and with as few mistakes as possible. Your safety standards and precautions may be as close to perfect as possible. However, even doing all of those things will not completely protect you from liability. 

While you might be able to control your business, you can’t control those who come into your business or who you partner with. You also can’t fully control your staff, despite what you may think. So, even if it’s no fault of your own, you can still get sued. A misunderstanding, a miscommunication, or even a fraudulent claim can cause a lawsuit against you. There are people who are looking for a quick buck, or perhaps they have decided not to like you and want to make you suffer. 

Whatever the reason, if you are sued, you will need legal representation. Without the right coverage, you will have to pay for it out of your assets, even if you are not at fault. Then, when things get into the legal system, there is no guarantee that you will win. 

We Live in a Connected World

It used to be that at the end of the day, you could lock your important documents, client files, and employee files in a secure filing cabinet or a safe and they’d be relatively well protected. Now, however, much of what we store is in digital form. Not only that, but it’s either stored on computers and devices that are connected to the internet, or in the cloud itself. 

That means that protecting your business also means protecting your clients and your staff. Their data is valuable to criminals, and if it gets into the wrong hands it can be used for nefarious means. You should have strong password and encryption protection. However, if you have a data breach, or if a cyber attack gets the data, then you could find yourself facing several lawsuits if your clients have suffered as a result. With cyber liability protection, you will have that coverage, and you will be protected. 

The Investment Will Be Worth It

You might hesitate to invest in all of these types of insurance. That is understandable, because it can be hard to see the value if nothing goes wrong. However, if something does happen,you will be more than happy to have it. There’s no putting a price on peace of mind. Plus, if a lawsuit is brought against you, you could find yourself in financial peril trying to fight it. Investing in insurance means investing in your business and the people who make it successful. Do not cut corners. 

As you can see, there is a lot to know about liability insurance for a small business. Don’t let it get you down, however. Insurance is an important aspect of any business operation, no matter what size and what type. While coverage will vary from business to business, in the end, it’s all about being protected from what might come your way. Do not treaty liability lightly. If you are found negligent, you could find your business going bankrupt, and you needing to use your personal funds to cover it. Protect your business, your staff, and your clients with the right liability insurance. 

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