Small Business Advice - Liability Insurance
Do I Need Liability Insurance for my Small Business
Owning a small business comes with responsibility and accountability. No matter how careful you are, one day your business may be the subject of a lawsuit.
Everyday business activities have the potential to affect third parties, e.g. visitors, subcontractors, even trespassers who may be injured or whose property may be damaged.
An industrial company could buy pollution cover against environmental accidents.
Around 80% of US business are partnerships or sole proprietorships according to Bizstats.
This form of ownership puts your business and personal life at risk, and you should be adequately covered to avoid losing everything in the event of a claim.
What is Covered with Business Liability Insurance?
Typical judgements, damages and awards, legal and attorney fees, loss productivity, transport costs, loss of use of damaged property, loss of business profit.
Some industries such as security or cleaning are considered high risk by the insurance underwriters.
Negligence can be as straightforward as someone slipping on your business floor. Perhaps you did not contribute to this accident, but if the floor had a spill on it or the carpet was wrinkled you may be held liable.
Small businesses should have public liability insurance, while they may think they cannot afford it because they are small, they will not survive a lawsuit without it.
General Liability Insurance
Provides cover for legal fees for general claims made by the public for injury or personal loss should it be found that the negligence of the business caused such damage. Some policies will not cover the damages should the business be found guilty of such negligence.
Small Business and Insurance
If you run a business with a few employees you need to pay workmans compensation as the fund covers medical costs and/or damages that arise if an employee is injured on the job. This may also be taken out as an employer’s liability insurance. The rate here depends on your payroll and industry.
Food Contamination Liability Insurance
If your business deals with food, either as a restaurant or grocer, you should take up this insurance. This protects from claims of food poisoning and can also cover spoilt produce as a result of power failures, which may affect the whole premises.
Poor workmanship Liability Insurance.
If your business produces goods, the policy covers defective products that may slip through quality control.
Product Liability Insurance
Businesses selling or manufacturing products should be protected in the event of someone being injured by using your product.
Professional Liability Insurance
This insurance is known as errors and omissions, which covers against malpractice, errors, and negligence. Besides Doctors, technology consultants need coverage in independent contractor work arrangements.
This policy relates to the loss, and damage of company property due to a variety of causes such as fire, hail storms, vandalism and riots, etc. ‘Property’ definition is quite broad in this instance as it includes lost income, business stoppage, buildings, computers and company papers and money.
Two basic forms i.e.,
a) All Risk Policies which covers all types of incidents except those noted in the policy document.
b) Peril specific policies cover losses from those listed in the Policy, such as flood, fire, crime etc. This type of policy is usually purchases in an area where these specific perils are prevalent.
Employers liability Insurance
Check with your State Insurance Department that the company you are dealing with is registered with them. Check also what they recommend and what the law requires in your state as to what type of cover and how much of it your business requires.
A Business Owners Policy is an all in one package policy created for the small to medium business. It provides coverage for property, general liability and business income loss due to fire or other covered event and may be an excellent option. This policy does not cover health, disability of auto insurance each of which required a separate insurance.
Tips Concerning Liability Insurance
Always keep a clean and safe Business environment, and ensure a high standard is kept in both product and service:
1. Check that all employees are trained in the equipment they use, know how to keep safe at work and to be on the lookout for unsafe practices or areas in the workplace, such as
- Stairs are free of clutter, safe and dry, no loose bits of carpet or rubber. Banisters are firm.
- All electrical cords, plugs, wiring etc., is safe, wrapped and no bare or exposed wiring.
- Wipe up all spills, check regularly that the smoke, fire and/or perimeter alarms are working.
2. Keep a record of all your documents and business transactions, receipts for business equipment and any other relevant paperwork in a safe place.
3. Make a complete inventory of the property, equipment and the relevant values. Ensure that you update this inventory annually or when you purchase new equipment. The assists in evaluating the amount of cover you need.
4. Take photos of your business premises and your equipment.
5. Ask Employees if there are any areas which they can identify as unsafe or in need of upgrading, or suggestions on how the company can improve.
These five steps will ensure you have everything to hand and up to date should you ever need to file an insurance claim.
© 2012 Shelley Watson
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