Whether you run a two man shop or a fifty strong company, having general business liability insurance may be a necessity. Small business owners may not think they need this type of insurance, but end up getting sued and you may think again.
“If you don’t have this it could ruin the business,” says Loretta Worters, a spokeswoman for the Insurance Information Institute. “If someone is causing a lawsuit you have to hire a lawyer, you have to take time out from your business. It’s very costly.”
General liability insurance protects small business owners from things that happen during the course of business -- whether a customer gets hurt using a product or there is some kind of disaster. It covers the business and the business owner from any claims that involve bodily injury or property damage. Typically this type of insurance offers protection from lawsuits, covering investigations to defend the business and settlement costs.
Some of the things general liability insurance typically doesn’t cover include employee injuries, professional mistakes and auto related incidents, according to Nationwide Insurance. Business owners can take out other forms of liability insurance that cover those specific things. For instance, there’s product liability insurance, professional liability insurance, commercial property insurance and home-based business insurance.
While general liability insurance isn’t a requirement for many businesses, it is something business owners should considering having, says Alyssa Gregory, of About.com’s small business guide. “It depends on a number of things, where you’re located, type of business, the kind of product you’re selling and how the business is structured,” she says.
According to Gregory, a common misconception among business owners is that certain business structures -- like an LLC -- protect the business owner from all forms of liabilities, making liability insurance unnecessary. Not so, she says, which is why it makes sense to have additional protection.
For many small business owners the assets of the business rather than the size typically dictate whether to secure general liability insurance and the amount. The type of business also plays a role in whether and how much liability coverage you may need.
“The potential liability depends on the business,” says Worters, noting the cost of the insurance usually depends on the risk and assets of the business.
Liability insurance typically comes as part of a business insurance package. Some homeowners’ policies may even include some protection, noted Worters. Any small business can take it out and while the cost to be insured varies based on the type of business, Gregory says it’s not as expensive as people think.
“It's easy to work into the budget,” says Gregory. “It's not like it’s so expensive its going to break the business. “
When looking for general liability insurance it pays to shop around. Insurance experts say to get at least three quotes and compare what each package covers.
“Shop around because there are a lot of commercial providers out there,” says Worters. “Each of them provides different types of coverage. Some have more bells and whistles than others.”
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