Liability insurance protects you and your business against lawsuits arising from accidents or injuries on your property or while people are on your property and can also cover other exposures such as defamation and slander. It protects you, your employees, and your customers from being held accountable for acts that result in injury or property damage.
Small businesses may not be aware of the importance of liability insurance. The law requires that all businesses that have employees carry it. And when you fail to carry it, you could be held responsible for any damages your company has caused. Here are some reasons why every small business should have a liability insurance policy:
1. Protects Businesses From Claims Out of Negligence
If someone gets injured on your property, they could sue you and demand money. If the case goes to court, the judge might decide that the amount of damages is too high for you to pay and order you to pay it instead. If this happens, there would be no way for you to pay—and without any assets to sell at auction, you could not raise enough cash to cover all the costs involved in fighting the lawsuit. An insurance policy protects against these kinds of losses so that if something goes wrong with one of your businesses, someone else can cover those losses instead.
The most common liability claims involve injuries to people, property damage, and lawsuits alleging that another party’s product was defective. Liability coverage can help protect against these claims so that you are not forced to pay millions in damages out of pocket for someone else’s wrongdoing.
2. Replaces Lost Revenue
Business interruption coverage pays for lost revenue due to business-related events covered by your commercial general liability policy. For example, if your insurer pays for your property damage when a tornado hits your business and damages the building, this coverage would help you keep your doors open. The same goes for theft or vandalism — if someone makes off with cash or inventory from your store, this coverage could help replace what was stolen or damaged.
3. Might Be a Requirement
In many states, the liability insurance required to open a business is the same as that required for any commercial enterprise. It’s necessary that every small business has enough liability insurance coverage to protect itself from these types of claims — but it’s even more critical that every business has enough liability insurance coverage in place to protect its employees! You should also consider including business interruption insurance in your policy. This covers losses caused by acts of nature or third parties, such as fire and theft.
4. Mitigates Financial Loss
Business income protection provides financial assistance to small businesses when they cannot earn income because of sickness or death of an employee or other reasons outside their control (such as natural disasters). This coverage is designed to mitigate any financial loss resulting from these events by paying wages during the time in which the insured cannot work due to sickness or death of an employee (or other qualifying events) and up to two years after. Business income protection also includes benefits such as temporary workers’ compensation benefits and death benefits.