By Rieva Lesonsky
In partnership with The Hartford
Horror stories abound. You’ve certainly heard about small business owners getting sued by customers or clients. The result? Costly (both in time and money) court battles—or even the possible loss of their businesses. Don’t chalk this up to hyperbole—this can happen to you. And it can all stem from a simple accident, such as one of your servers spilling water on a diner’s computer or a client falling as they enter your office.
Before you start worrying, however, it is possible to protect yourself from these and other business risks. Having the proper insurance for your small business can help keep your business safe from the aftermath of incidents like these.
Are you covered? Take a look at checklist below of the basic types of liability insurance you’d likely need to keep your small business safe
General Liability insurance: What exactly is general liability insurance ? General liability insurance (also known as commercial general liability insurance) helps protect your business from claims of property damage, bodily injury, or personal injury. What does this mean? In the examples above—a client accidentally falling in your office or store or damaging a customer’s computer—general liability insurance covers the loss. It also protects your small business against personal injury claims, such as getting sued for slandering a client on social media or other public forum.
Does every business need liability insurance? Well, if your staff or you interact in-person with customers and clients, if you have access to a client’s equipment, or if you represent your client’s business, having liability insurance is a smart idea. In some cases, clients may require you to have general liability insurance coverage in order to do business with them.
Professional liability insurance: Professional liability insurance (also known as errors and omissions insurance—or E&O) protects your small business if a client or customer claims you’ve been negligent in performing your work. For example, if you are an accountant, professional liability insurance would protect your business if a client claimed you made an error while doing their taxes.
What businesses need professional liability insurance? Professional liability insurance covers you for claims of financial harm from a third party—meaning customers or clients. If you provide a professional service, or offer advice to clients, you should have this type of insurance coverage. Many clients insist you have this type of coverage as a condition of entering a contract with them. (My business has E&O coverage for this very reason.)
Business Owners Policy (BOP): While general liability insurance covers your business against your clients’ or customers’ losses, it does not cover your business’s losses, such as damage to your business property or equipment, if, for instance, there was a fire at your restaurant, store or office. Look for a Business Owners Policy that combines general liability insurance with property liability insurance for your small business. Getting a Business Owners Policy that can be customized to protect you for losses from business interruption, employee theft, business vehicles and electronic data loss is an even smarter option.
Does your business need a Business Owners Policy? Getting a BOP is a good idea if you have employees, own the building where your business is located, work with large amounts of data, or own business equipment.
Home-based business insurance: Many home-based entrepreneurs think their homeowners’ insurance covers their businesses. However, in most cases, it will not cover business-related losses. If clients or customers get injured while at your home, or if you experience a computer crash and lose valuable data, a separate home-based business insurance policy is needed to cover the losses. You have several options here: 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 everything mentioned above, remember different industries and professions have different needs when it comes to insurance coverage. To better protect your business, look for an insurer that offers business insurance policies that can be tailored for your business, and talk to an insurance agent with small-business experience to make sure you get the coverage you need.