Liability Insurance, or Commercial General Liability Insurance, covers your small business from any potential risks and it is one of the more affordable ways of ensuring your business. Liability Insurance can be taken out for any business, however there are other types that need to be taken into consideration so that any business owner can be ensured in the right way for their business. This article will take a look at the most common types of Liability Insurance, including costs and policy covers.
According to the U.S. Small Business Administration, 2019 Small Business Profile there are 30.7 million small businesses of the United States businesses, which make up 99.9%. With this large amount of small businesses with employees there needs to be due diligence in obtaining the right type of insurance. According to a recent article from Next Insurance, 44% of small businesses never had insurance and this can be due to timing, accessibility, and even affordability. With so many SMEs (Small to Medium-sized Enterprises) on the market it is useful to know what potential costs will be for insurance.
Types of Liability Insurance: Covers and Costs
General Liability Business Insurance
General Liability Business Insurance covers damages imposed by the business owner or the employees, as well as injuries caused on the business property. This type of insurance is best used when there is business property and other physical assets involved. TRUiC offers an easy-to-understand explanation of general liability insurance and what risks are covered, below are some of the policy covers:
- Injuries and Damages: this includes physical bodily harm or harm to the property (owner’s or client’s).
- Medical Payments
- Legal proceedings
- Liabilities: these can be personal and advertising, which includes copyright infringements, slander, eviction, or invasion of privacy and property amongst others.
General Liability Insurance will cost between $300 to $1000 per year, although with the varying types of business out there the premiums will change for each business according to the needs of the business, for example, factors like experience, location, size, and insurance history can all affect the outcome of the premiums.
Professional Liability Insurance
Professional Liability Insurance is also known as errors and omission Insurance (E&O), which provides cover incase of negligence in the professional environment, for example, if a customer finds that information or services offered by the business was harmful to them financially or in other ways or if the business failed to offer substantial services. If lawsuits are made against the business E&O will provide cover for the necessary costs incurred.
Professional Liability Insurance will cover businesses that offer services or advice, below are important risks that will be covered by E&O:
- Inaccurate work or advice: if the business offers advice or does work that provides inaccurate results, which can cause the customer to lose money in many cases, and if mistakes are made, the customer can sue in order to reclaim what they lost.
- Negligence: this can be negligence with services rendered, and if specific standards are not maintained and followed, which can impact the quality of work and how the customer is affected.
- Failing to meet Expectations / Results: this occurs when a business makes promises or ensures specific results after a service rendered, and sometimes if results are not obtained customer’s can sue due to losses incurred.
Professional Liability Insurance can cost anywhere from $500 to $1800, similar to the general liability insurance, there are different factors involved that can influence the premium, for example, age of the business, number of employees, what type of industry, and location.
Employer Liability Insurance
Employer Liability Insurance, otherwise known as Workers’ Compensation, covers employees in case they fall ill or are injured from the work done. This insurance can be beneficial to get in case an employee sues the company and to provide protection for the employees’ health and safety – it not only protects the employer, but also the employee. If the business has more than one employee it is worthwhile to invest in this type of insurance, but not necessarily mandatory, however if there are more than three, four, or five employees (dependent on state requirements) it will be mandatory to have cover.
It is important to note that each state has different policies on this type of insurance, what the specific benefits will be and what medical care will be available, in addition, if the business has locations in two different states the necessary research needs to be done.
A Workers’ Compensation policy will cover the following:
- Medical expenses: these will include any rehabilitation costs and reimbursements for expenses incurred during medical care.
- Missed Wages: if the employee needs to recover and will need time off from work, they will receive some payment during this time.
- Death / Funeral Benefits: if an employee passes away due to an accident/injury this will provide cover and be paid out to the family members.
The cost of a Workers’ Compensation Insurance is affected by the type of work done (the industry), if it is a line of work with more risks the premiums will be higher. Another factor that will influence costs is location; some locations can pose higher risks than others. In addition to the above, other factors might affect the premiums:
- Claims History
- How many employees there are in the company
Part of being a business owner (small or medium) is having the knowledge of what will protect you and your business, and what will save you time and money. A General Liability Insurance is the most common type of insurance to have when starting your new business; the above three liability insurances mentioned are guideposts to start with, although there are various types of insurances to have when it comes to business ownership (not all mentioned in this article) however, knowing your business needs and what state you will operate in will determine what your policies, TRUiC’s informative articles on liability insurance can help you determine your best insurance policies.