By Rieva Lesonsky
We’ve all heard horror stories of small business owners being taken to court and even put out of business after being sued by a customer or client. If you don’t think this could ever happen to you, think again: Something as simple as accidentally spilling coffee on a customer’s computer or having a customer slip and fall in your store could lead to a costly and time-consuming lawsuit. How can you protect yourself?
Having the proper small business insurance can help keep your business safe from these risks. Here’s a quick checklist of the basic types of liability insurance you may need.
• General Liability insurance: What is general liability insurance ? General liability insurance, also called commercial general liability insurance, helps protect your business against a third party’s claims of bodily injury, property damage or personal injury. What does liability insurance cover? In the examples above—a slip and fall accident or damaging a computer—general liability insurance would cover the loss. It will also protect you against personal injury—for instance, if one of your employees slanders a customer on social media and the customer files a lawsuit.
When do you need business liability insurance? In general, if you or your employees interact with clients face to face, if you have access to a client’s equipment, or if you represent your client’s business, liability insurance is a good idea. You may also run into situations where a client requires you to have general liability insurance as part of a contract.
• Professional liability insurance: Also known as errors and omissions insurance (E&O), this type of insurance protects your business if a customer claims that you have been negligent in performing your work. For instance, professional liability insurance would protect an insured business if a client claims they made a mistake on his or her taxes.
When do you need professional liability insurance? If you regularly give advice to clients or provide a professional service, you should have this insurance. You may also be required to have professional liability insurance as a condition of a customer contract. Professional liability insurance covers you for claims of financial harm from a third party, namely a customer.
• Business Owners Policy (BOP): General liability insurance covers you against your customers’ losses, but it doesn’t cover your business’s own losses, such as damage to your business property or equipment in case of a fire at your office. You can get a Business Owners Policy that combines general liability insurance with property liability insurance for your business. Look for a Business Owners Policy that can be customized to protect you for losses from business interruption, employee theft, business vehicles and electronic data loss.
When do you need a Business Owners Policy? If you own the building where your business is located, work with large amounts of data, have employees or own business equipment, getting such a policy is a good idea.
• Home based business insurance: If you operate your business from home, you may not realize that your homeowners insurance may not cover business-related losses. For example, if a client visiting your home office gets injured, or if your business computer crashes and you lose valuable data, you’d need home-based business insurance to cover the losses. You can get general liability insurance and professional liability insurance for home-based businesses, or purchase a Business Owners Policy customized for home-based businesses that encompasses both types of insurance.
In addition to the above, keep in mind that different industries and professions have different needs when it comes to insurance. To best protect yourself, look for an insurer that offers specialized industry insurance policies tailored to your particular industry’s risks, and talk to an insurance agent with experience in small business to make sure you get the coverage you need.
This post is sponsored by Hiscox. All words and opinions are my own.