No matter the size of your businesses you should carry commercial liability insurance to protect the company from any lawsuit. It doesnâ€™t matter if your business consists of just one person operating as a private contractor, or a large business with many employees and several locations, it is imperative to shield assets with liability insurance.
The cost of business liability insurance will depend on several factors. The first is the worth of the business, the type of business, and whether you need general liability insurance or a more specific type of commercial liability coverage.
General liability insurance for a business is intended to guard the company against large financial losses in case of a personal injury claim or property damage lawsuit. Even if you are found to be innocent of any wrong doing or liability, defending the company against the claim can be expensive and liability insurance will pay for legal defense.
What is Business Liability Insurance?
Business liability insurance covers your company for damages done to someone outside of the company. This is not for the business or its employees, this is for what is termed a third-party, or someone outside the business (like a client or customer) that is hurt at your place of business or by an employee of the company, or damage is done to their home or other property. If awarded, the money is not paid to you, but to this third-party.
The damage might stem from someone slipping on the sidewalk, a business vehicle accident, or an employee knocking a hole in the wall of a clientâ€™s home. There are various types of damage and injuries that business liability insurance will cover the cost of, while saving your company from financial distress.
Are There Different Types of Liability Insurance?
There are several specialized forms of business liability insurance including:
- General Liability Insurance â€“ is a type of broad coverage that protects small business owners from lawsuits initiated by someone injured on your property or resulting from the actions of your employees.
- Automotive Liability Insurance – covers company vehicles and any injuries or property damaged caused through the operation these cars, trucks, or other vehicles.
- Product Liability Insurance â€“ protects the business from lawsuits initiated because of products and items that your business manufactures.
- Professional Liability Insurance which may also be called Errors and Omissions Insurance – covers you in case of a lawsuit arising from services you provide. This might include counseling of any type, day care, pet grooming, tax services, or any type of service granted.
- Employersâ€™ Liability Insurance – covers the business when a lawsuit is filed because one of your employeeâ€™s may have caused another employee to become sick or injured. General Business Liability Insurance will cover third-parties from injury or sickness, but it another employee becomes injured or sick due to another employeeâ€™s actions, then Employersâ€™ Liability Insurance will protect the business from a lawsuit filed by an employee. This type of liability insurance is different from workers compensation insurance. Employersâ€™ Liability Insurance is required by some states.
Business Liability Insurance Costs
Business insurance rates, including business liability insurance costs, are determined by the stateâ€™s Department of Insurance. Insurance companies will have different rates, based on their overheads and additions, but the rate for each specific insurance company will be the same whether you get the quote online, from a broker, or directly from an agent.
The cost of business liability insurance can be affected by many items including:
- Liability Insurance Limits â€“ which refers to the maximum amount the insurance company will pay out on a claim. This limit varies and you should make sure you have the right amount of coverage based on your businesses specific risks. This is important because if you purchase a policy with a million dollar limit and lose a lawsuit awarding the third-party more than a million dollars, the business will have to make up the difference. Work with your insurance agent or broker to determine the best liability limit for your company.
- Deductible â€“ most general liability insurance policies donâ€™t have a deductible. This is the amount that the business would have to pay before insurance covered the rest of the lawsuit. However, a small business owner that would not have a high risk factor might be able to keep their liability insurance costs down by agreeing to a deductible.
- Exclusions â€“ business liability insurance costs might differ based on exclusions. This means that there would be some things that are not covered under the policy and these things might differ from quote to quote. It is important that you understand what exclusions, if any are in your quoted policies. Examples of exclusions might be intentional injury, breach of contract, acts of war, etc.
Business Liability Insurance Quotes
Business owners can get an online estimate of costs from NetQuote, a service that provides business liability insurance quotes. This service will provide as many as five quotes from national insurance carriers within a few minutes of filling out a small questionnaire. The quotes are provided at no cost and without obligation. These online business liability insurance costs are quoted by companies such as Nationwide, The Hartford, Allstate, as well as insurance agents based locally.