Liability Insurance for your Business – What Do You Really Need?

Running your own business can be fantastic. You get to be your own boss, set your own hours, and work in the field that really interests you. When you’re the business owner, you have flexibility to choose when and how much to work.

There are also, however, significant responsibilities that go along with owning a business. You may encounter unhappy customers or clients who are never satisfied with your efforts, no matter how much you invest or how hard you work. There are always going to be people who are dissatisfied, and there’s only so much control you can exert in those situations.

But what about situations where you have nearly zero control? Potentially, you could sell a product that damages someone’s property or causes them physical injury, or one of your employees could get injured while doing their job. Someone may even fall or have an accident in your office, without your involvement at all. And it’s your business, so these things are your responsibility.

In any of these situations, you’d have to take responsibility for the damage, even if you weren’t negligent. That’s why it’s so important to get business liability insurance.

Business liability insurance is there to share that responsibility, giving you protection from potential loss.

What Liability Insurance Do I Need?

You don’t want to pay for insurance that you’ll never need, but you also don’t want to find out that you really needed that insurance once it’s too late.

There are several types of business liability insurance. Depending on your business, you could need one, two, or more of them in order to minimize your risk as much as possible.

The first step to getting the right liability insurance for you and your business is to understand your options. The main types of business insurance are:

• Third Party liability insurance
• Professional liability insurance
• Product liability insurance
• Employer’s liability insurance

Third Party liability insurance

Third Party liability insurance is the most vital and basic type of business insurance. In the USA, this is called General Liability Insurance. It covers you in case someone is injured on your premises, or off your premises but because of your work.

Here are some examples to demonstrate just why Third Party insurance is crucial for every business:

• A client walks into your office and trips over the carpet on the way in, breaking her wrist. She sues you for the cost of her medical treatment as well as for her loss of earnings over the next 6 weeks while her arm is in a cast, because she can’t continue her work as a graphic designer.
• You and your assistant go into a client’s house to fix a leaky tap. Your assistant doesn’t pay enough attention to the toolbox he’s carrying, and accidentally smashes an expensive vase. Your client expects you to pay for a replacement.
• You put your toolbox down on the sidewalk while you’re loading your van in the morning. An early jogger falls over it and breaks his nose. He sues you for medical costs and for associated damages to compensate for his mental anguish over his disfigurement.

Professional liability insurance

Professional liability insurance covers you for the consequences of any mistakes that you make as part of your professional role. Most service-based businesses, like consultants, designers, or contractors, are likely to need professional liability insurance.

You might need professional liability insurance when:

• You install a new window into your client’s bedroom, but the whole frame falls out the wall in the first big storm. Your client sues you for the cost of replacing the window, as well as clearing up the broken glass beneath the windowsill and fixing the damage caused by the stormy rains that blew into the room.
• You advise a client to choose matte tiles to finish off her kitchen, but she can’t wipe them clean easily. Six months later, the brand-new kitchen looks filthy. She insists that you replace all the tiles with shiny, wipe-clean ones at your own expense.
• You’re writing and sending marketing emails for your clients when you accidentally break a spam law, landing your client in court. Your client requires that you pay for all his court expenses and damages.

Product liability insurance

Products liability insurance covers you for damage or injury caused by products that you sell. You’ll only need this if you run a business that sells items (rather than services) but think carefully before you turn it away. You might need products liability insurance even if you only sell a few products on the side.

Consider these possibilities:

• You sell children’s toys. A customer comes back to complain that one of your new toys splintered into tiny sharp shards of plastic the first time it was dropped, causing injury to his toddler’s hands and feet. He sues you for his child’s medical costs.
• You’re a masseuse, but you also sell massage oils to your clients. One of your customers buys a bottle of massage oil, but he has a serious allergic reaction to it. He sues you for his medical treatment as well as his loss of earnings while he recovers.
• You sell bathroom fittings to your clients as a sideline in your plumbing business. The bathroom fitting you sold to a client breaks after just a few days, causing a flood that ruins the ceiling of the apartment below. Your client sues you for the cost of fixing the damage caused by your faulty product.

Employers’ liability insurance

Employers’ liability insurance protects you in your role as business owner and employer. It covers your liability in case one of your employees gets injured during the course of their work.

These examples show why you might be glad to have employers’ liability insurance:

• You work as a handyman. Your assistant drops a heavy wrench onto his foot, breaks a toe, and can’t work for the next two weeks. He is seeking compensation for his medical costs plus his lost wages.
• You are a DJ, and your employee falls off the stage while setting up your sound equipment for a wedding that night. She twists her ankle, and is on crutches for two weeks, making it impossible for her to do her job until her ankle heals. She not only needs reimbursement for her crutches, but also the wages she was not able earn due to her injury.
• You run a makolet and employ a pre-med university student. Your employee falls off a ladder while stocking shelves, breaks his arm, and shatters two finger bones. Suddenly, his plan of becoming a surgeon is in jeopardy, and he sues you not only for his potential earnings over the next month at the makolet, but also for his future years of lost potential earnings as a surgeon.

Why is business liability insurance important?

With the right business liability insurance, you’ll be protected from many costs if something does go wrong. What’s more, your insurance company will defend your claim on your behalf, even if the claim is unfair or unjustified. This way, you won’t end up out of pocket just because your assistant knocked over a vase or the client didn’t watch where they were going, and tripped in your office.

But the importance of having the right business insurance goes beyond simply protecting yourself from losing money if a client makes a claim against you. It gives you the peace of mind to focus on building up your business, without worrying about ‘what ifs.’ It also shows your clients that you are a trustworthy business, and that you take responsibility for your mistakes. A reputation for trust, professionalism and reliability helps you to get new clients and expand your business.

How to choose the best business liability insurance for you

Choosing the right business liability insurance can be a tricky decision. Every business has different needs, so it’s important to consider your specific circumstances before you make insurance buying decisions. Here are some questions to ask yourself to help you decide on the best business insurance.

No business can afford to be without liability insurance. That’s why you need to choose the right type and level of insurance for your specific business situation, so that you can minimize liability without paying for unnecessary insurance policies. Goldfus employees help you to understand your exposure to risk, identify the types of insurance and amount of insurance that you need, and do all you can to minimize your liability so that you can do what you do best.