In a word -- yes. In a litigious society such as the one we live in, not even a small business should go without liability coverage. Why? It's all about risk. You might call them customers or clients or employees right now. But there's always the scary chance you'll have to call them plaintiffs some day -- in a lawsuit against you.
Commercial liability coverage can assist you in case you find yourself in a courtroom. It can help pay for your legal defense as well as any award or settlement made in the case. Of course, different businesses operate with different risks, so you don't necessarily want a one-size-fits-all solution. That means you should talk your coverage over with a trained, independent agent who can give you the industry perspective on your risk and how you can manage it.
Types of Business Liability Protection
There are a number of types of business liability coverage, including the following:
General Liability. This is a necessity if you have customers who visit your small business. It protects you in cases related to injury or property damage. Here's one example of how it could be used: Say you run a diner and a customer slips and falls because a waiter didn't mop up a spilled soft drink. The customer breaks his leg and is out of work for a month. The customer could sue for medical costs, lost wages, and even pain and suffering.
Product Liability. You need this coverage if you make or sell a product that could be defective. An example: You run a bakery, and that banana pudding you sold Thursday shouldn't have been sold after Tuesday. Multiple customers get sick and sue you for medical costs.
Professional Liability. This type of protection also can be called errors and omissions insurance. When would a small business need it? Say you're an architect in a small office, and your plans contain a flaw that affects the structural integrity of a building. You could be on the hook if it collapses and injures its occupants.
Employment Liability. If you've got employees, you're at risk for claims of discrimination, wrongful termination, and other problems. The danger is that you could be responsible for back wages and possibly even punitive damages; defending yourself against such claims can be expensive as well.
Commercial Vehicle Liability. If you use a company car for deliveries, this is a no-brainer. But even if you use your personal vehicles -- or if your employees use their personal vehicles -- for company business, you could be on the hook if you or an employee cause a wreck.
Which type(s) do you need?
It depends on which risks you face. If you run an alterations shop and don't make deliveries or have employees, you won't need professional liability, employment liability, or commercial vehicle liability coverage. If your bakery includes catering, you could need all that and more.
One possibility is a Business Owners Policy, which combines general liability and property insurance coverage. But again, it might not have enough protection for your venture.
How much will it cost to purchase every coverage you need? That depends on exactly what you include in your policy, the size of your business, the risks it faces, the coverage limits you choose, and the deductible, among other factors. But consider how much it could cost not to have coverage in the event of a lawsuit. You'd likely be on the hook personally for legal expenses and any payout.
What if your small business is a home business?
Finally, some small businesses are small enough that they stay at home. If the owner has homeowners insurance, does that mean his or her business has liability protection (since personal liability coverage typically is included in a standard home insurance policy)? The answer: No. Home insurance specifically excludes business activity. Again, depending on whether you have customers or employees or face professional or other issues, you could need several types of protection.
The bottom line: Any business can be a risky business. But that doesn't mean you should just say "What the heck?" The right liability coverages offer help with the biggest challenges to your venture. They can mean the difference between following your dream and getting stuck in a nightmare.
This article was contributed by Carrie Van Brunt-Wiley, editor of the Homeowners Blog at HomeInsurance.com. HomeInsurance.com serves as a resource center for insurance consumers and homebuyers across the country.
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