Did you know that, according to Oberlo, there were 30.7 million small businesses in the United States in 2019? They are also major drivers of the growth of the global economy.
If you run a small business, then you’re probably curious about business liability insurance.
Maybe you’ve recently heard about it from someone in the industry. Now, you’re worried about potential lawsuits and want to make sure you’re protected against them.
Or maybe you’ve recently had to pay a lot of money for a lawsuit, and you don’t want it to happen again.
Whatever your reason, it’s a good idea to invest in a business liability insurance policy. It protects both your business’s reputation and ability to survive.
In this article, we’ll review everything you need to know about business liability insurance. That way, you can know what’s covered, what isn’t, and whether it’s right for your small business. Read on to learn more.
What Business Liability Insurance Is
There are many different types of business liability insurance you can benefit from investing in, but today we will focus on 3. These are commercial general liability insurance, product liability insurance, and professional liability insurance. Commercial general liability is the most common.
However, you should consider the other types of business liability insurance, too.
What General Liability Insurance Is
As a business owner considering getting this type of insurance, it helps to know what general liability insurance is. Basically, this an insurance policy that protects you financially if you end up having to be responsible for an accident that occurs at your business.
This might include something like someone’s property being damaged or a customer getting injured at your business.
Additionally, business liability insurance may cover you if you need to defend yourself when someone has accused you of slander or libel.
In our modern world where so many claims are made and misunderstood online, this is an especially important aspect of business liability insurance.
For this reason, most small businesses purchase general liability insurance. Often, this is the first one that they invest in before investing in other types of business liability insurance.
Note that this type of insurance is often also called commercial general liability (CGL) insurance.
What General Liability Covers
General liability is designed to cover accidents that have caused physical harm, the damage that has occurred to property that belongs to someone, and legal issues such as slander, libel, and copyright infringement. Let’s review these in detail.
Accidents That Have Caused Physical Harm
When you have this general liability type of business liability insurance coverage, your policy can cover you for accidents that have caused physical harm. Even though no one plans for accidents, they happen with many businesses.
For example, if you run a gym, and someone trips on a piece of exercise equipment and breaks their wrist, they might sue you.
If you have general liability insurance, this type of claim can be covered. Instead of having to pay thousands of dollars in legal fees or for this person’s injury, the insurance may step up to cover the legal costs and resulting injuries.
Usually, there are three types of lawsuits that are covered by general liability insurance:
Loss of Income
Let’s say that an accident occurs at your business. As a result, someone is injured, after which they aren’t able to return to work. In this case, your general liability insurance can cover the income they’ve missed out on.
If someone is injured at your business, then that person’s medical expenses may be covered by general liability insurance. However, this is only up until your policy’s limit, after which you’ll have to cover the rest.
It also excludes you and your employees.
Pain and Suffering
If there is an accident at your business, and someone has additional pain or suffering after, general liability insurance may cover this, too. For example, if mental strain results, your insurance might cover the treatment the injured person receives.
Damage to Someone Else’s Property
Not all accidents harm a person. Sometimes, they harm the property of that person. Let’s say, for example, that during a construction project, you accidentally damage someone’s car. Or, if you run a salon, you might accidentally spill product on someone’s expensive shoes.
Instead of having to pay for these costs, general liability insurance can cover them.
Libel, Slander, and Copyright Infringement
Libel, slander, and copyright infringement legal costs may also be covered by general liability insurance. These might include people suing you for breach of privacy or defamation of character. Even though you do your best to do everything legally, mistakes do happen.
Here are some examples of what you’d be covered for.
Considering how many businesses are out there now, copyright infringement can happen very easily by accident. Perhaps you created a logo that you think is totally original. Months down the line, someone with a similar logo sues you for copyright infringement.
You can get your legal fees covered in this situation with general liability insurance.
Breach of Privacy
Perhaps the business you run is painting landscape pictures of people’s properties. To show off your craft, you posted a picture on Instagram of your landscape picture next to someone’s home and yard. They consider this a breach of privacy.
Instead of having to pay for a lawyer when this happens, your insurance policy may step up to defend you.
Defamation of Character
Let’s say that you get in an argument on Twitter with a rival company, and you end up saying some things to defend yourself that you believe to be true about the rival company. However, if these things aren’t true, they can sue for defamation of character.
Instead of being bogged down by legal fees, you may be covered.
Product Liability Insurance
Product liability insurance is another type of business liability insurance. If you sell products or make them, then this might be a good insurance type for you to invest in. After all, if there are any issues with your products or they end up harming someone, you need protection.
When there’s a marketing defect with your product, it’s not the product itself that has a problem. Instead, it’s that the product was marketed in such a way that it might harm the customer. You could end up getting sued as a result.
Some examples of marketing defects include insufficient instructions, safety warnings that are incorrect, a lack of safety warnings, or incorrect food labels.
If there’s a manufacturing defect with one of your products, you might not even be aware of it. This is certainly the case for many e-commerce small business owners who design products remotely, after which they’re manufactured and shipped directly to customers.
When your product has a manufacturing defect, it might be missing a piece that’s important. It might also have been assembled incorrectly.
If the manufacturing defect causes a serious problem for your customer, then you might have to pay them a lot of money. Product liability insurance may cover these costs.
If your product has a design defect, then there’s something wrong with it even before it goes through the manufacturing stage. If you sell any type of technology, furniture, or something else that needs to be physically handled, a design defect could be dangerous.
Protect yourself from the damage caused by a design defect by investing in product liability insurance.
Professional Liability Insurance
If you offer services, then you might want to invest in professional liability insurance. This type of insurance is also called errors and omissions insurance. Basically, if you’ve done a service for your client and they’re dissatisfied with it, this insurance protects you.
Let’s say, for example, that you’re a marketing manager who handles a different number of clients.
For the most part, they’ve been happy with your work. But you have one client who is convinced that your services resulted in a loss.
Even though it’s actually because you’ve had to switch their target audience, which means starting over with building customer loyalty, they want their money back.
They might even be trying to sue you. In this case, you can use professional liability insurance to pay for these costs.
Professional liability insurance can also be used to protect you if there are errors in your work. For example, let’s say you’re a graphic designer. Perhaps you made a small mistake and sent the client the wrong draft of their logo.
Unfortunately, they used this version of the logo when making a presentation to potential funders.
As a result, they not only want their money back but also want to sue you for this costly mistake.
If you work in a service-related industry where the quality of your work has a direct impact on client success, you should consider getting professional liability insurance.
This is the right protection for IT consultants, accountants, architects, engineers and designers.
Other Types of Business Coverage
So far, we’ve covered the main types of business liability insurance. There are a few others you should consider, depending on what industry you’re in. These include cyber risk and data breach insurance, property insurance, and commercial auto insurance.
Cyber Risk and Data Breach Insurance
If you store a lot of your client’s personal information or data, you might want to invest in cyber risk and data breach insurance. Considering that cyber attacks are becoming more common, this will protect both you and your clients.
After all, if a cyber attacker demands money in exchange for getting your data back, you’ll be at a loss for what to do.
Additionally, your clients might want to sue you for not having the right protections in place.
If you store important information, such as credit card information, identity-related information, or health information, you should definitely invest in this type of business insurance.
If you’re a designer who relies on your computer to get all your work done, then covering your computer with property insurance is smart. If you run a much larger operation—for example, a construction business—then a piece of equipment not working can cost you thousands of dollars.
Whether you want to protect office equipment, technological equipment, stock, or tools, property insurance is a good idea for any business owner.
This way, you can avoid costly repairs and replacements.
Whether it’s because of an accident on-site or an issue like inclement weather that causes the damage, property insurance will make it possible for you to keep getting your work done.
Commercial Auto Insurance
If you run a small business where many of your employees use cars, you’ll need to invest in commercial auto insurance. This will keep your drivers safe and protect you if there are any accidents when they’re out getting the job done.
Whether you use these cars to drive clients around or to deliver your products quickly, this type of auto insurance is a must for any business that uses cars.
Need More Information?
Now that we’ve reviewed the different types of business liability insurance you might want to invest in, you might have additional questions. Maybe you want to learn about the potential business liability insurance cost you’d have to pay.
Or maybe you want to find the right business liability insurance provider for you.
Whatever you need, we can help. At EPG Insurance, we’re experts when it comes to insurance for businesses. We also offer insurance products across 49 states, excluding North Dakota and Puerto Rico.
To learn more about how we can help you, contact us now.