Liability insurance is a common business insurance policy that protects your company from third-party liability and the legal costs associated with such claims. If your business is facing new challenges, challenges that are putting your company at risk for potential financial loss, you’ll want to take a hard look at your current coverage policies and see which ones need updating or are completely missing. Depending on the nature of your small business and the risks involved, there might be some liability insurance policies that will suit you perfectly. Let’s take a closer look at what liability insurance is and its different forms.
What is Liability Insurance?
Liability insurance is coverage that protects your business from financial loss due to an accident or injury that was caused by your company and/or its employees. The coverage, which is normally part of a business owner’s insurance policy, provides protection for your business in the event of a slip-and-fall, an employee injury, or damage to someone’s property. Liability insurance is also known as third-party liability coverage and is designed to protect your business from lawsuits associated with your operations. It covers legal defense costs, damages awarded to third parties, and any settlements or court judgments related to such lawsuits.
Types of Small Business Liability Insurance
There are currently three types of liability insurance for small businesses: General Liability, Product Liability, and Professional Liability. Let’s take a closer look at each type of coverage.
- General Liability: This policy protects your company from claims related to bodily injury or property damage caused by your organization. General Liability can also cover your employees against claims made by other people, such as customers who visit your offices or workers who are on your premises. It also covers any legal costs that might be associated with defending your company in such instances. If your business is in an industry that could result in bodily harm to others, such as food processing, landscaping, or construction, you should consider purchasing at least a minimum General Liability policy.
- Product Liability: This coverage protects your business against claims that a faulty or faulty product has caused damage or injury to individuals. This type of policy is usually required by law when your business sells certain products. Examples of industries that are typically required to have Product Liability coverage include building contractors, contractors of all types, wholesalers, and manufacturers.
- Professional Liability: This policy protects your company against claims regarding services that are provided by your organization. Examples include architecture, engineering, accounting, law, marketing, and IT.
- Cyber Liability Coverage: Cyber liability insurance is a kind of insurance policy that covers financial losses caused by cyber-attacks such as hacking, data breach, and ransomware. It also covers losses caused by denial-of-service (DoS) attacks, malware attacks, and malicious code attacks. It protects e-commerce business owners from cyber threats because it covers the costs associated with data breaches and ransomware attacks. Cyber liability insurance is also referred to as internet security insurance, digital risk insurance, or online security insurance.
- Other Liability Coverage: Liability coverage can be purchased as an endorsement or rider to an existing policy to extend coverage to certain risks. Endorsements are additions to your existing policy that extend coverage to risks that are not covered by your current policy.
Building your own risk management program
Let’s say your small business has been operating without liability policies in place. Your company may have been operating on the premise that “we are such a small operation that we won’t be a target.” However, you never know what could happen. In fact, even a small slip-up can lead to a big problem. For example, an employee who steps into a puddle and gets their shoe wet on the way to work one rainy day has the potential to create a big headache. If the employee has clogs on, they could leave behind some very visible footprints. If the puddle is outside a client’s building, that could result in a situation that requires professional clean-up. If the puddle is on the sidewalk, it could result in a slip-and-fall scenario that could, in turn, lead to a worker compensation claim. All of these situations have the potential to cost your business money. A risk management program can help you to identify, evaluate, and manage risks in order to keep your business and your finances safe. A risk management program can help you to identify, evaluate, and manage risks in order to keep your business and your finances safe.
Here are some things you can do to get started:
- Conduct a thorough assessment of your business and operations
- You’ll need to look at every area of your business, such as your products, delivery methods, and the way you interact with customers. If you have employees, be sure to look closely at their tasks and responsibilities, too.
- Identify any areas of risk
- For each area of your business that you look at, make a note of any potential risks.
- Put together a risk management plan
- Once you’ve identified all of the risks, put together a plan to address each one.
Liability insurance is an important part of your small business’s insurance coverage. However, it is important that you understand what it covers and how much coverage you need. It is also important to understand when you should purchase this type of insurance and whether you need to add a rider or endorsement to your policy to extend coverage to certain risks. With the right coverage in place, you can rest assured that your company is protected in the event of an accident or injury that was caused by your operation.