Liability Insurance For Small Businesses

Liability insurance protects your business from claims arising from bodily injury, property damage, copyright infringement and reputational harm. It’s a common part of commercial multi-peril policies.

The US is the largest liability market, writing USD 84 billion in premiums in 2013. The UK is second with USD 9 billion in cover and Australia third with USD 4.8 billion.

General Liability

A commercial general liability policy (also known as a CGL) safeguards your business from the economic fallout of common incidents that can happen during the course of running just about any type of small business. These include property damage and claims of bodily injury.

Let’s say a customer’s computer falls over and breaks at your hair salon. With a general liability insurance policy, your business may be reimbursed for the cost of repairing or replacing it.

If a client’s car is damaged by an employee while it’s being serviced at your auto shop, or if someone is injured by a defective product that you manufacture or sell, this kind of incident could lead to expensive lawsuits. A good general liability policy helps pay for damages, medical expenses and legal fees. It also covers reputational harm like libel or slander and copyright infringement. Many cities and states require this type of coverage before businesses can open for business.

Auto Liability

Auto liability insurance protects you financially if you are responsible for car accident injuries and damages. Most policies have a bodily injury per person limit and a property damage limit, which set a cap on the amount your insurance will pay for medical expenses to other people involved in the crash and damage to their vehicles or personal property like fences or buildings.

Depending on your state’s laws, you may also need personal injury protection (PIP) or uninsured motorist coverage. In no-fault states, PIP pays for medical expenses and some other costs regardless of who caused the accident.

Even a minor car accident can add up quickly. It is a good idea to get enough auto liability coverage to protect your assets, such as your home and savings. You can also buy an umbrella policy to provide higher limits and broader coverage. It’s a good idea to speak with your agent about the best options for you.

Employers’ Liability

Employers’ liability insurance protects businesses from the costs associated with employee-related lawsuits. This includes legal defense costs and potential settlements or judgments awarded against the company. Typically, this coverage is sold in conjunction with workers’ compensation insurance as a package or as “Part Two” of an insurance policy, with workers’ comp being “Part One.”

While workers’ comp covers most employee work-related injuries and illnesses, there are some exceptions, including third party lawsuits, such as when an employee sues a manufacturer over a work-related injury or illness (for example, if a lawn care business employee sues a lawnmower manufacturer over a defective mower), or loss of consortium suits by spouses seeking punitive damages for the death or serious injury of a loved one. It also doesn’t cover employment practices liabilities like discrimination, harassment or wrongful termination.

Employers’ liability insurance premiums depend on payroll, industry, number of employees and location. Talk to a knowledgeable agent about your needs and about ways to save on employers’ liability premiums.

Professional Liability

Professional liability insurance — also known as errors and omissions (E&O) insurance, malpractice insurance or fidelity insurance — covers your business in the event that clients suffer financial losses from work performed by you. It’s an essential coverage for many types of small businesses, including architects, engineers, doctors and lawyers.

While it’s a different type of coverage than general and auto liability, some businesses may need both professional and general liability to fully protect their business. For example, a marketing consultant who needs professional liability to address issues related to their work but also requires general liability to cover bodily injury or property damage on client sites.

Unlike commercial general liability policies, most professional liability policies are “claims-made” and only provide coverage for claims that are made during the policy period. To avoid gaps in coverage, consider a “scheduled occurrence” policy or prior acts endorsement. If you discontinue or cancel your policy, be sure to submit a completed Professional Liability Insurance Reimbursement Claim Form and any required documentation to the SHRO as soon as possible. assurance rc

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