The Ultimate Guide to Liability Insurance

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The responsibilities of running a successful company involve many moving parts. You have to hire team members, manage customers, market your services, and so much more. It’s easy to forget about the risks involved with your operations that could threaten its long-term success. This is why you need business insurance to protect your livelihood against events that are sometimes out of your control.

But, how much do you need? And, what kind of policy is best for your particular industry?

What is Commercial Liability Insurance?

Commercial insurance protects your company from risks that threaten your business. The most common form of this coverage is general liability. This is usually the first policy you will purchase, but it only offers basic protection against third-party damage claims (those not employed by you), including:

  • Bodily harm
  • Property damage
  • Personal injury (libel, slander, etc.)

The important factor to remember when picking commercial coverage for your business is that anything can happen. Of course, you can have the best safety and quality control precautions in place, but if that isn’t enough, how will you handle the fallout? Instead of shouldering the entire burden of liability on your own, business insurance absorbs much of the cost.

Does Your Business Need More than General Liability?

General liability policies are a solid foundation for your overarching insurance strategy for your business. However, you need to cover more than just third-party damage claims brought against you. Several coverage options can address specific risks that could impact the long-term success you hope to achieve:

Commercial Auto

Whether you have a single company vehicle or a fleet, you need commercial-grade auto insurance with higher liability limits. Many states require carrying this policy type since personal vehicle coverage excludes autos used for business.

Professional Liability

Suppose you run a business that offers professional services, such as a doctor’s office or accounting firm. Making mistakes that cause your clients’ financial harm can be costly. However, professional liability insurance costs are just a fraction of the price of what a lawsuit would ultimately be without one of these policies to pay for your legal fees and possible judgments made against your organization.

Workers’ Compensation

Another mandatory insurance you may need is for businesses with a specific number of employees. Workers’ compensation is essential liability coverage that protects both you and your team should someone get sick or injured while at work. It also covers your legal costs against employee negligence claims and pays for any subsequent compensation, including lost wages and medical expenses.

Cyber Insurance

As cybercrime becomes more prevalent, your data security efforts will be more vulnerable to attack. When a breach or ransomware event occurs, who will be held responsible for your customers’ damages after having their sensitive information stolen? You will sense it’s nearly impossible to catch perpetrators of these crimes. Cyber risk coverage will not only pay for the claims brought against your company but help you recover from this event and pay for associated legal costs.

As you can see, there are many options to choose from to create an effective insurance package to protect your business interests, employees, and customers. Instead of running the risk of going bankrupt due to property damage or a serious accident caused by an employee, you can have peace of mind knowing that you’re adequately insured against such events.

How Much Coverage Should You Buy?

The amount of liability insurance you need to purchase should be based primarily on your industry and business needs. For example, if you’re regularly in the field working on a client’s property, you may want to buy general coverage with higher damage limits. Or, if you’re a tax accountant, a robust professional liability policy may be wise if you make a costly error on a customer’s tax return.

It would be best if you also considered insurance for more than you may think you need. For example, your business will experience periods that go from slow to busy overnight, increasing risk in performance, quality of services, and product standards. Additionally, you can also determine how much coverage to purchase by estimating the cost of specific claims.

If someone were to trip over an extension cord your employee left carelessly across a walkway, how much would you expect to pay for medical bills related to a broken ankle or strained wrist? What kind of reputational harm would you suffer if several team members became sick after getting exposed to chemicals in your plant? Quantifying potential liability costs can help you find the right level of insurance limits for your policies.

Get the Best Liability You Can From the Start

As a business owner, you have plans to grow your company and achieve financial success. However, you know that there are numerous risks you will face every day that could threaten your goals. If you haven’t already purchased a general liability policy at a minimum, you are gambling with this future you hope to create. 

Play it smart from the moment you begin offering your services or products to the public. Purchase several commercial policies bundled as a business owners policy (BOP) to get a more affordable rate. Don’t forget to include any coverages that address the uniqueness of your industry and buy at a level that will meet or exceed the amount of liability you face without coverage.