Few things are as wonderful as running your own small business.
As an entrepreneur, you’d be your own boss. No one else will be looking over your shoulder as you go about your work.
Under ideal circumstances, a small business owner will also tend to earn more than a salaried worker.
However, operating a small business takes a lot of hard work, especially if you’re just starting out. It comes with its fair share of risks as well.
Your small business might not make enough money to stay afloat, a scenario that countless other entrepreneurs only know too well.
Small businesses also face the risk of being at the receiving end of a liability claim or lawsuit at any time. All it takes is one customer, employee, client, or member of the public filing such a claim, and you’d be facing a battle that could end up with your business closing down.
You need to protect your business against such claims. Liability insurance can help you do that, and more.
Let’s take a look at the different types of liability insurance coverage your small business needs.
General Liability Insurance
Also referred to as business liability insurance, general liability insurance can help protect your business should people file claims for the following:
- Bodily injury—If a customer files a claim for bodily injury after slipping on the floor of your shop and falling hard enough to break a hip, your general liability insurance coverage should enable you to pay for that customer’s medical bills without taking the money out of your pocket.
- Property damage—If you’re running a roofing company and one of your workers accidentally drops a heavy tool onto the hood of a client’s parked car and causes a major dent, general liability insurance for contractors will cover the cost of repairing the property damage.
- Reputational harm—Your business could end up being accused of reputational harm by a competitor, saying you or your employees slandered their business and caused financial losses. Should such accusations develop into a full-blown court case, your general liability insurance will come in handy, covering your legal expenses.
- Advertising errors—If the ads for your business use copyrighted material without permission, the owner of those materials will likely file a liability claim against your business for copyright infringement. Your general liability insurance will cover the expenses that come with defending yourself against such a claim up to its limits.
Workers Compensation
With the exception of Texas, all states require businesses with one or more employees to get worker’s compensation insurance.
Then again, even if your state does not make it mandatory, it would still be a great idea to get worker’s compensation insurance. After all, it will protect your business from lawsuits filed by workers who hurt themselves while working.
Although statutes may differ from state to state, workers’ compensation insurance is designed to help workers who get injured or fall ill while on the job get the medical care they need. It also allows them to receive compensation for the working days they miss while recovering from the job-related injury or illness.
Worker’s compensation will also pay for an employee’s disability benefits should a work-related injury or sickness render him or her temporarily or permanently disabled.
If a workplace accident causes the death of an employee, workers’ compensation will cover funeral costs and other death benefits, like financial assistance for the deceased worker’s family.
Professional Liability Insurance
If you’re an accountant, engineer, lawyer, physician, architect, dentist, or any type of expert providing professional advice and services to clients, you need to seriously consider getting professional liability insurance to protect your business.
Your clients expect you to provide them nothing but top-notch advice and service since you’re a specialist in your field, and they paid good money for your expertise.
However, any error or sign of neglect from your end that adversely affects your clients in any way will likely file a malpractice or negligence suit against your business.
Let’s say you’re running a small accounting business out of your home, and you make an incorrect entry into your client’s books. Because of that error, your client ends up with an incorrect budget projection that leads to a budget deficit later in the year.
Once the client traces the error to your inaccurate entry, the likelihood that you’ll be at the receiving end of a lawsuit soon is quite high.
The same thing will happen if you’re an architect who turns over plans that don’t satisfy project specifications, a tax preparer who fails to beat the deadline for filing a client’s tax returns, or a management consultant who gives out financial advice that turns out to be way off the mark.
Considering the high cost of hiring a lawyer and paying for any settlement a court hands down against you, you would be glad if you had professional liability coverage, which is also known as errors and omissions insurance.
Wrapping Up
Running a small business is awesome, but it’s no picnic, as there are many challenges and risks that come along the way.
One day your business is going great, then a liability lawsuit the following day suddenly sends you back to Earth.
It doesn’t matter if it’s for an injury sustained by a customer while inside your business premises or for erroneous advice that adversely affected a client’s business.
Once you face a liability lawsuit and your business doesn’t have the right liability insurance coverage, prepare to spend a lot of money fighting it out in court or paying a sizable court-ordered settlement in your accuser’s favor.
In many cases, the financial strain of a liability lawsuit forces a small business to shut down for good.
It’s imperative that you get the appropriate liability insurance coverage for your business. That way, you can ensure that it will continue operating smoothly even when someone sues your business for bodily injury, property damage, reputational harm, bad professional advice, or negligence.