Essentials of Liability Insurance

Small business liability coverage can protect your assets from lawsuits

Introduction
When shopping for business liability insurance quotes, it helps to know a little about liability insurance and what you need to protect your business. Your business liability insurance policy should cover two areas: the exposures at your premises and the exposures that arise from your products or services. Each of these coverages and policies will have stated limits that restrict the sizes of the payouts by the insurance companies. Here are some common coverages found on business liability insurance policies. 

Premises liability coverage
Everyone who comes to your business — customers, vendors and even people who are trespassing — can sue you if they hurt themselves on your premises. Premises liability insurance protects you from claims that arise from operations on your premises, not for claims based on your products or your work. Things that can get you sued include the failure to warn a customer of obstacles, such as computer cables across an aisle, or the failure to make repairs that could have prevented an injury, such as a defect in a floor.

Medical expense coverage
If your injured customer wants to get his or her medical bills paid and doesn’t see a need for a lawsuit, the medical expenses coverage on your business liability policy will pay his or her bills on a no-fault basis. 

Products-completed operations liability coverage
The products-completed operations section covers claims filed against your business when someone using your product is injured. Retailers, wholesalers, manufacturers and any business that offers non-professional services, such as the building trades, all need products-completed operations coverage on their liability insurance.

Personal and advertising liability insurance
An innocent joke about another business can become a lawsuit if your competitor believes your joke has harmed his reputation. Personal and advertising injuries include libel, slander, intentional infliction of emotional harm, invasion of privacy, misappropriation of advertising styles and techniques and other kinds of economic or emotional injuries.   

Fire legal liability
Fire legal liability coverage pays for property damage if a fire at your leased premises is found to be because of your negligence.  Liability policies almost always include $50,000 of coverage, but the limit should be based on the replacement cost of the building and how much of it you occupy. If, for example, you rent one-third of a $5-million building, your limit should be about $1,670,000.

Professional liability insurance
If you’re a doctor, lawyer, architect or other professional, you should purchase a professional liability policy in addition to your general liability insurance. Professional liability is also known as malpractice, errors and omissions and E&O. If a client is harmed because of negligence, an act or a failure to act in your professional capacity, malpractice insurance will defend you and pay the judgment if you are found to be at fault.

Employment practices liability
If you have employees, consider purchasing employment practices liability coverage. It defends against claims by employees, former employees and people who applied but were not hired. Discrimination in hiring, firing and promoting and workplace harassment are just a couple of the many circumstances that are not part of your business liability insurance but are covered by this policy.

Tips & Warnings
Seek your insurance agent’s advice on how much liability insurance you need. Depending on how your business is structured, you may be personally liable for a jury award that is bigger than your per-claim limit.

Consider purchasing an umbrella or excess liability policy to increase your liability insurance limits.

Landlords, equipment rental companies and businesses you contract with may want you to add them as an “additional insured” on your general liability insurance policy. This will give them rights under your policy. Additional insureds will count against your liability limits and could dilute the coverage you need if there’s a claim. Ask the landlord or other businesses whether they will accept evidence of insurance instead, which is just proof you have insurance and doesn't give them rights under your policy.

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