When you own a business, liabilities lay around every corner. No matter what type of product you sell or service you provide, how many people you employ, or where you’re located—your business has liability exposures that need proper coverage.
Liability insurance policies cover third-party claims made against your business. Depending on the situation, your liability insurance plan can pay for your legal fees and the settlement paid out to the claimant should you be found liable. You can click here to learn more about liability insurance policies for small businesses, what they cover, and how much coverage your business should have.
But before proceeding any further in your search for proper insurance, it’s useful to take stock of all the liabilities your specific business is exposed to. Listing the specific risks your company faces can inform your decisions when purchasing insurance and help you identify steps you can take to prevent these claims in the first place.
Across industries, small businesses commonly face the following forms of liability exposure:
Should a product designed, manufactured, modified, or sold by your business cause bodily injury to a third party or damage their property, you can be held liable for the associated expenses. Product liability insurance covers the costs of defending your business from such claims.
Bad Advice, Negligence, or Malpractice
Service-based businesses face unique insurable liabilities every day. If your business provides any type of service, a client can sue you for negligence, omission, misrepresentation, inaccurate advice, or malpractice. A professional liability insurance policy, also known as errors and omissions insurance, can cover these claims and more.
Third-party Bodily Injuries and Property Damage
If your business invites third parties (such as customers) to your business property or conducts a service on a client’s property, you’ll need commercial general liability insurance. This form of liability insurance covers bodily injury and property damage caused by your business. It can pay for the medical or repair expenses associated with a claim, as well as your legal expenditures.
Employee Injury Lawsuits
In general, having a workers’ compensation insurance policy ensures that an employee cannot sue their employer for their on-the-job injury. However, an employee may still take you to court for their workplace injury if they claim negligence. In this case, employer liability insurance, often included in workers’ compensation policies, will cover your legal expenses. It’s important to note that not all workers’ comp policies have this feature, and you may have to purchase the coverage separately.
Should an employee driving a company car cause an accident, resulting in bodily injury to another person or damage to their property, your business can be held liable for the resulting expenses.
To mitigate the risk of at-fault auto accidents, businesses need commercial auto insurance. Subcategories of commercial auto insurance include:
- Bodily Injury Liability– If an employee is found at fault for an accident that injures another driver, this form of car insurance covers their medical expenses.
- Property Damage Liability– Under the same circumstances described above, property damage liability insurance covers physical damage done to the third party’s property, typically their vehicle.
Your business may unintentionally harm a third-party, such as a competitor, while promoting your goods or services. The victim could make a claim of libel, slander, copyright infringement, or another form of advertising injury against your business. Fortunately, commercial general liability insurance covers these claims.
Cyber Attacks and Data Breaches
While data protection laws differ from one jurisdiction to another, business owners are generally responsible for any personally identifiable information (PII) they handle or store. If you lose such customer or employee data in a hacking event, the victims could sue you for any losses or damages. A cyber liability policy could then compensate the victims and protect your business from financial loss.
Liability insurance policies can protect your business from the costly consequences of third-party claims, such as bodily injury, property damage, malpractice, and product flaws.
Even if your business already has a few of the coverage forms described above, you should periodically audit your liability exposure. Doing so can help you identify any unanticipated risks that emerge with changes in your business and can expose gaps in coverage.
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