No small business owner wants to deal with unplanned payments. Perhaps the best way to avoid these kinds of unexpected—and potentially ruinous—expenses is to spring for business liability insurance.
If someone files a lawsuit against your company, business liability insurance can help protect you. It can cover damage payments, settlements, and even legal expenses, both of which can be very high depending on the kind of lawsuit. There are essentially three important kinds of business liability insurance that can protect you: general, product, and professional.
The Importance of Insurance
All forms of business liability insurance protect you and your corporate assets. If someone believes your company is guilty of something like copyright violation or false advertising, insurance will ensure—thus the name—that neither you nor your company will be financially responsible for restitution. General insurance can also protect your company from non-legal damages. For example, if a fire destroys your office or workplace, this kind of insurance will cover the cost of repairing it or else provide you with a new, equivalent one.
What Happens If You Don’t Have Insurance?
Small business owners put themselves at financial risk when they run a company without insurance. Even if you or your business have done nothing wrong, a claim could still be filed against you. If you haven’t paid for business liability insurance, you will have to pay out of pocket to defend yourself in court. If the lawsuit filed against you is successful, you will also have to recoup the complainant’s financial loss or otherwise compensate them as directed by the court.
The Cost of Business Liability Insurance
The size of your business as well as the sector you operate in will largely determine what kind of insurance you need and how extensive your coverage will be. Another important factor, though, is your legal history and whether or not you’ve had lawsuits filed against you in the past.
If your business is ultimately considered “high risk,” the amount you pay for insurance—also called your “premium”—will be high. If your company is considered too risky for conventional insurance, you may be able to get an “umbrella” insurance that covers unique situations. Unfortunately this, too, will be costly.
Construction or mining companies will likely have to pay more for business liability insurance than office-based companies. If your small business is particularly low-risk, you can combine property with general liability insurance to get a Business Owner’s Policy. This is often a less expensive option.
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