Nearly all business owners know they need insurance to protect their business assets from potential lawsuits. Few small business owners understand the finer points of business liability insurance. Indeed, it's a nuanced industry as business insurance is constantly evolving. Your grandfather's hardware store probably didn't have employment practices insurance because it didn't exist, at least not in its current form. This evolution of business insurance isn't about insurance companies trying to complicate the process for their own benefit. It's about responding to the growing perils for business owners in today's marketplace. About sixty percent of all businesses will be sued by a former employee at one point or another. Without the right type of business liability insurance, you can find yourself out of business if the employee wins his or her suit. Here's what you need to know to get the most from your business liability insurance and to protect the future of your business.
Common Types of Business Liability Insurance
- General Liability Business Insurance: General liability business insurance is a way to protect your business from lawsuits that charge your business did something (or didn't do something it should have) that caused personal injury or property damage. The two most important factors to determine the level of coverage needed and liability is the nature of the business and the state in which you operate. A metalworking factory is probably going to need more liability insurance than a vintage apparel shop. But general liability business insurance is also needed for service-oriented businesses. A consulting firm may need particularly high liability limits to protect against the consequences of proffered advice. It's also important to understand the tort system in your state and the potential for astronomical damages awarded to plaintiffs.
- Directors and Officers Liability Insurance: Business liability insurance is not just for the owner. Many lawsuits aimed at businesses will also go after business directors and company officers. If your business employs someone at this management level, you should carry this type of business insurance. Most savvy directors and officers will demand you carry this insurance before they join your company. And, in any case, this insurance will give you a decided hiring advantage over any company that doesn't have this insurance.
- Errors and Omissions Insurance: As much of a perfectionist as you may be, you can't be everywhere at once, and one of your employees is bound to make a mistake at some point. Errors and omissions insurance is a way to protect your business if you fail to meet the obligations enumerated in a business contract with one of your clients. Most important, these types of contractual obligations may not be covered by your general liability business insurance.
- Employment Practices Liability Insurance: Many very socially responsible, open-minded business owners, nevertheless, end up worrying about getting sued every single time they make a hire, don't make a hire, fire someone, promote someone, or demote someone. From the first ad you put in the paper to the exit interview, business owners feel like they must keeping over their shoulder for employees who worked for two days or two decades, job candidates who seemed flaky, combative, or enthusiastic about the job opportunity. Employment practices liability insurance is necessary to make sure you can focus on what's truly important when making hiring and firing decisions.
- Business Owner's Policy: While it's important to understand different types of business insurance, most business owners don't relish the idea of carrying half a dozen separate policies. Thus, insurance companies created business owner's policies, commonly known as BOPs, to create an all-in-one insurance plan. BOPs frequently combine your chosen liability insurance protection with business property insurance. Be warned, however, BOPs have limitations, too. Often, there are lower limits for general liability business insurance, so if you own a metalworking factory, you may need to purchase a separate general liability business insurance policy with a higher limit.
What Business Liability Insurance Doesn't Cover
Business liability insurance is not absolute. If you commit a criminal act or intentionally inflict personal injury or property damage, you may still be personally liable for these damages. The purpose of this limitation is obvious: Nobody wants to actively encourage irresponsible behavior or subversion of the insurance system. Some of these insurance exclusions were enumerated during a time period in which organized crime tried to use business insurance to their unscrupulous benefit.
Business Liability Insurance Quotes
Now's the time to make sure your business is covered for all potential risks and eventualities. But it's equally important that you find the most cost-effective coverage possible. Take a minute to fill out NetQuote's online request form for business insurance, and we can start matching you to the insurance companies that offer policies in your state and which fit your business's insurance needs.
See how much you could save today on your insurance. Get your free business insurance quotes today!