Business liability insurance isn’t a luxury; it’s a necessity for your business in the event of a potential lawsuit.
Say you’re a physical therapist with your own business. You’re crushin’ it in your biz and then boom! Out of nowhere, one of your old clients sends you a letter and is suing you because he tripped and fell inside your waiting room. Your heart is racing and the last thing you need is to deal with this.
So you call your attorney and he asks you if you have business liability insurance. You’re thinking: did I ever buy that? Time literally stops. You remember reading about it but you know you never got around to buying it.
I don’t want this to be you. Hard work and a really bad lawsuit that is the result of not having business liability insurance can put you out of business. As a business owner, you will need this insurance and there are several types of insurance that you can buy to best fit your business too.
Business liability insurance protects you from liability arising from accidents, injuries, libel, and slander. The policies also cover the legal fees to defend the lawsuit. Some of your vendors or customers may even require you to have this before they do business with you.
If you sell or manufacture a product, than you most likely need product liability insurance. Product liability insurance will cover you if there is a lawsuit that results from someone using your product. The insurance will protect you even if you are negligent and liable for damages. Many wholesalers and retailers of your product will require you to have this type of insurance if you are the manufacturer. Also, many wholesalers and retailers are encouraged to have product liability insurance s well. The insurer also pays the costs to defend you.
If you are in a service based business, you may need a general business liability policy and a professional liability insurance policy. Professional liability insurance is more commonly known as Errors & Omissions (E&O) insurance. E&O insurance protects you if someone sues you claiming they lost money or were somehow damaged as a result of the service you offer. The insurer also pays the cost to defend you.
If you are a home based business owner and work out of your house, most homeowner’s policies won’t cover liabilities or losses from your business activities.
Here’s what you should do to protect yourself as an entrepreneur :
1) Get a referral for an insurance broker. They are independent insurance professionals and can shop the best policy from the best insurance company that’s right for you. If you go to your local State Farm or Farmers or Allstate agent, they may be able to offer it to you, but they can only sell you their company’s policy.
2) Tell your insurance broker the nature of your business. Ask him/her to identify your potential exposure, should you ever have to pay a claim.
3) Do 25 jumping jacks. You still reading this?
4) Tell your insurance broker what your sales and profits are.
5) Look into how much everything is. I have seen policies for business liability insurance that cost under $1000 a year for $1 million dollars of coverage. It’s not that expensive. Review this with your insurance broker.
Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.