The number of options for business insurance can sometimes be overwhelming. As an entrepreneur, you need to take a lot of important steps before starting your own business. This includes writing a business plan, getting finances, purchasing insurance, among others.
Huge financial losses due to unforeseen and unplanned events are every business owner’s concern. Injuries, property damage, accidents, and other liabilities can bring huge losses in your business finances.
Without the right insurance coverage or enough cash reserves, a large and unexpected liability can make you shut down your company’s operations permanently.
According to the US Small Business Administration, a lot of small business owners make the mistake of thinking that by forming a Limited Liability Company (LLC), they’ll get protection when faced with a lawsuit.
But while this structure offers you protection from personal liability for actions of the LLC, the liability protection is limited this even goes for LLC franchise.
This is why it is essential to have general liability insurance for small business. This type of insurance provides liability coverage for some risks common in many companies.
While most people understand the importance of buying business insurance, many of them might not have enough knowledge on how to get the right level of protection.
Below you’ll find important questions you should ask yourself before buying general liability coverage for your business.
1. What Are Your Legal Obligations?
Not all small business owners are required to buy insurance for their businesses, but some are, depending on their state laws, industry, and other requirements.
Every business, whether small or big, is a risky venture. But unlike big companies, small enterprises don’t have enough cash reserves to settle a large and unexpected claim, such as liability for an accident.
Should someone become injured on your property and you’re found responsible for the injuries, you’ll need to shell out a lot of money for liability claims.
The medical expenses required to treat the injured person, and the legal fees for defending your company can add up very quickly.
Unless you have enough money to cover up these expenses, your business is at risk of closure if you don’t have proper insurance coverage.
General liability insurance is specifically designed to protect companies from unexpected incidents and mishaps.
2. How Much Liability Coverage Do You Need?
The amount of liability coverage that you need is one of the most important things you should consider when buying any insurance policy. You surely don’t want to be shocked when you learn that you don’t have the proper protection when the time of need comes.
The amount of liability coverage that your business need depends on a number of factors, including the industry, nature of your business, perceived risks and the location. For instance, the coverage limits for a machine shop is different from the limits a home-based consulting firm should carry.
It is important to choose the right coverage for your company because the insurance company will cover costs up to the coverage limit. You’ll be required to pay any remaining liability, and this could burden you a lot.
3. What’s Covered?
General liability insurance, also known as business general insurance or commercial general liability (CGL) is a type of policy that protects your business from a wide range of liability claims.
It offers protection for property damage, bodily injury, damage due to slander and libel, and liability from unintended misleading advertisements. This policy helps you in paying for expenses associated with claims such as settlement costs, legal defense costs, and medical expenses.
Business liability insurance is designed to protect the interest and financial assets of your company from third-party liability claims.
It is also important to know what is not included in your general insurance coverage. Some insurance companies will provide a list of what is not included in the coverage to help understand your liabilities.
Knowing that your coverage won’t cover loses that results from certain activities and behaviors will help you in making informed decisions and protect your company.
4. Is There a Way to Reduce General Liability Risk?
While general liability insurance is designed to protect you from unexpected liability costs, as a business owner, you need to do everything possible to reduce liability for your company.
Remember that claims history affects your premiums, so reducing your risks will make you pay lower premiums as your company maintains a claims-free history.
The easiest way to reduce risks is to follow safety regulations and laws, considering the wellbeing of your employees, clients, competitors, and the general public.