Liability insurance. It’s that piece of paper that protects you when your company decides to “move fast and break things”. Actually—it’s much more than that.
A liability insurance policy makes sure that the financial costs of an accident or injury don’t sink the business you worked so hard to build. Here are a few examples where owning a liability insurance policy could help your business:
- A client slips and breaks his arm during a site visit and decides to sue your company.
- You dent a homeowner’s front door while moving equipment for a renovation and they demand compensation for the damage.
- An employee in your company makes a false claim about the competition, and they sue you for slander.
There are a variety of scenarios, but you should get the idea.
If someone brings claims against your business, liability insurance covers both the legal fees associated with defending yourself and the final compensation if you’re found responsible. Leaving your company insurance with liability insurance means you could potentially be paying a bigger price if a lawsuit was brought to your company.
Every business owner should have liability insurance.
There are countless commercial insurance options on the market, and it can be overwhelming for business owners to determine exactly which insurance policies they need.
While no one wants to be left exposed, no business owner wants to overextend themselves by paying too much in monthly premiums.
That being said, liability insurance is a fundamental piece of your commercial insurance pie. Even if you haven’t taken the time to explore all of your insurance options, don’t waste too much time stalling on liability insurance.
Whether you’re based in an office, a factory, or a mall, your business should have liability insurance.
WHATS NOT COVERED
The primary coverage types included in a standard commercial general liability (CGL) policy will protect against the most common risk exposures that the majority of small businesses face. However, there are some risk exposures and respective coverage types that are excluded from a CGL but may still be needed by the business.
Other missing coverage gaps will vary depending on your policy. You may be able to get coverage for an additional premium, or find it from a different carrier. However, the right coverage at the best pricing is almost always accomplished by bundling coverage types into one package.
One of the most popular examples of liability insurance is property damage liability insurance. Property damage liability insurance protects your business in case an employee accidentally damages a client’s property during a window installation or a plumbing job. It’s bound to happen with even the most careful workers.
Consider the amount of activity taking place in a house during a renovation. One of your employees may break a window, dent a wall in the hallway, or knock over an expensive antique.
Depending on the extent of the damage, the cost of paying back the homeowners might exceed the cost of the work you’re doing in the first place. That’s not a situation you want to find yourself in, and with the right liability insurance, you won’t.
If you sell someone a product with a no-refund policy and they decide they don’t want it later, that’s tough luck for them. On the other hand, if you sell someone a product that harms them in some way, you’re going to be paying a lot more than a refund.
In modern business, the old dictum “buyer beware” has lost most of its power.
For instance, if you sell a camera and a defect in the camera causes it to explode in the owner’s hands, you’ll be very thankful that you have product liability insurance during what’s sure to be an expensive year of recalls and lawsuits.
Consider another example of liability insurance, completed operations insurance. This particular type of liability insurance has your back in case you finish a job and things go south after the fact.
Imagine completing a rewiring job in an office building. The client’s happy, you get paid, and everyone goes about their business.
Several months later, a fire breaks out and the authorities deem a bad wiring job responsible for the blaze. Even if you avoid a criminal investigation, you’ll almost certainly be paying for the damage and additional compensation.
This kind of liability insurance doesn’t just apply to defects. Let’s say you own a fast food restaurant and several customers who visited on the same day come down with a serious virus. An investigation traces their illness back to a sick employee who came to work that day.
This is another instance in which general liability insurance can help you out.
Damage doesn’t have to be physical. It can be reputational and inflicted verbally or in writing. A general liability insurance policy can help you handle the legal fees associated with defending yourself against libellous or slanderous claims.
Likewise, liability insurance is useful if you find yourself on the receiving end of a lawsuit for libel or slander. If you make an untrue statement in a piece of advertising or in the media about your competition, and you’re slapped with a suit, your policy can help you cover the cost.
Professional liability insurance typically isn’t included in a general liability insurance policy. That said, it is an example of liability insurance.
Professional liability covers situations like:
- Mistakes or oversights: An accountant makes an honest mistake can cost his client millions of dollars.
- Subpar service: A consultant doesn’t deliver the service they promised as outlined in their contract.
- Undelivered service: A contractor is unable to deliver on the promised service.
All of these situations can lead to lawsuits. Is a useful to have professional liability insurance, since these sorts of mistakes are not covered under a general liability insurance policy.