There’s no denying it’s a dangerous world. Turn on the news and you’ll see more than enough evidence of that. And if you run a small business, you are often caught right in the crosshairs. This is quite a litigious society, and everyone is looking for their angle. The fact is, good people get sued all the time, and no matter how strong your products, how innocent your motives and how responsible your methods something can happen that blows up even the best laid plans. A small business has very little room for error, and a court case can bury a company quite easily. Of course, not every entrepreneur faces such issues. So how can you determine how far to take it? Should you have insurance for your small business?
This depends in large part on the size and style of your business, as well as the type of insurance that’s offered. There are varying insurance products that could help out the small business, but every single one won’t be right for you. The most common small business policy that’s taken out is general liability insurance. Basically, this policy would cover you in the instance of any legal trouble involving personal injuries, physical accidents and any negligence claims. General liability works quite similarly to health insurance. You’ll pay for it every month, and if all goes well you won’t ever touch it. But if you’re hit with a huge lawsuit, insurance will pay for the damages whether you win or lose. You’ll protect your business and personal assets this way. It’s a great option if you have a public office or if you ever make public claims about a product or service.
A more specific small business option is the product liability insurance. You should consider this product if your business focuses on products. Basically if you manufacture, distribute or sell any product you will be held responsible for the safety of that product. There’s a long list of companies that fell to a faulty product. Perhaps it’s a consumable and someone gets terribly sick, or you make toys and one of them injures a child. Regardless of the reason or the eventual fault, product liability insurance will protect your company. This is a pricey policy, so make sure it is worth it for your business. For example if you sell books or clothing there is a much smaller risk than if you sell appliances, machinery or food products.
If you run a service-based business, you might want to look into professional liability insurance. This is often known as errors and omissions insurance, and it basically protects you from any erroneous claims or negligent services. In some situations you may be required by law to carry an E&O policy. For instance, any entertainment company that releases a film must be covered under a professional liability plan.
Finally, consider commercial property insurance. This is similar to a homeowner’s policy, but covers not only your office, but whatever was in that office as well. You’ll find all-risk policies that will protect your business from basically anything, or you can trim your expenses and go with a peril-specific product. That way you can pick and choose what you want to be protected against, such as floods, fires or crimes. Your location will have a lot to do with the cost of this plan, just as your lifestyle impacts a high risk life insurance policy. But keep in mind that a business you run out of the home may also need this commercial property policy. Your basic homeowner’s insurance plan won’t necessarily cover your work unless you mention it specifically.