Running a small business involves accepting some degree of risk that an accident or unintentional injury could occur despite your best efforts. While you can do your best to make sure your company’s employees keep the walking paths clear, you just can’t prevent every slip and fall accident from happening. Nor, can you always stop someone from claiming that your employees damaged their property. When the worst happens, general liability insurance is meant to be a safeguard that helps prevent a lawsuit from ruining your company financially.
What Will Liability Insurance Cover?
Entrepreneurs quickly discover that operating a small business requires several types of insurance. While workers’ compensation insurance covers your employees in the event of an accident, you’ll also want to plan for the general public. General liability insurance for third-party bodily injuries, such as paying for the medical expenses of a customer who gets injured during an accident. You can also expect this type of insurance to cover third-party property damage along with product liability.
How Much Will General Liability Coverage Cost?
The amount your business will need to pay for general liability insurance depends upon several factors. For instance, a need for larger amounts of coverage will naturally lead to higher premiums. The industry that your small business serves along with its location can also alter the rates since some areas and sectors carry higher risks than others. Smaller companies will usually pay less for insurance compared to larger ones, simply because having higher traffic to your business increases the chances of someone filing a claim.
Are Small Businesses Required to Have Liability Insurance?
In many states, small businesses aren’t necessarily legally required to have liability insurance. However, this could vary according to where your company operates. Some states require companies that fall within certain fields to have this type of insurance. For example, construction companies may be required to carry general liability insurance due to the higher risk to the general public.
Even if you operate in a state where it isn’t legally required, you might still find that mortgage companies, property managers and certain clients require you to have it. In these cases, you may need to produce a certificate of coverage to demonstrate that your company is prepared to handle the financial costs of a lawsuit.
How Do You Determine How Much Coverage to Get?
Trying to skimp on insurance coverage can backfire if your company faces a serious lawsuit. Yet, you’ll still want to try to keep costs somewhat low, so they don’t cut into your profits. If you are required to have liability insurance by another party, then checking to see what level of coverage they require is a good place to start. You can also work with a business mentor to figure out how much your company needs based upon its size and risk factors.
Budgeting for general liability insurance is an important part of planning for recurring expenses. If your company is located in a place that is open to the general public, rents property or has anything to do with handling a customer’s property, then purchasing liability insurance is the best way to protect your company financially from being responsible for the aftermath of an accident.