Liability implies negligence. If you permit a hazard to
exist, you are negligent. An example is neglecting to remove the
ice and snow from the sidewalk in front of your store. But these
days, no matter how diligently you remove all possible hazards
from you business, you could be sued successfully for accidents
resulting from the carelessness of a customer too. Businesses
these days are assumed to be responsible for just about
anything, and so liability insurance is your last line of
defense against devastating claims for things over which you may
have little or no control.
General liability insurance will protect you from
payments required to be made for bodily injury or property
damage to a third party, for medical expenses accruing to the
underlying incident, for the cost of defending lawsuits
including investigations and settlements, and for any bonds or
judgments required during an appeal procedure.
This type of coverage comes with exclusions and limitations.
The exclusions typically include war and sometimes property of
others entrusted to you (such as clothing if you own a dry
cleaning business.) Liability for the property of others can be
removed as an exclusion, usually for an additional premium or
via separate coverage. Limitations will be akin to those on your
personal auto policy; for example $100,000 per person and
$300,000 per accident. In addition to general liability
coverage, depending on what kind of business you're in, you may
need one or more of the other kinds of liability coverages such
Product liability insurance, which can cover products
you may manufacture or sell or your services if you are, say, a
mechanic or house painter. Under the name of malpractice
insurance, this is the classification of coverage that will
cover physicians, dentists, accountants, and lawyers. In today's
world, a minimum of $1 million is recommend coverage for
businesses dealing with the general public. It's also a good
idea to have the name of your business added to your suppliers'
insurance riders as an "additional named" insured.
This adds another explicit layer of protection should a product
liability suit arise, generally costs nothing, and has become
common practice for companies in food retailing, wholesaling,
marketing, and manufacturing.
Auto liability insurance, which for a business, just
as for your personal vehicles, should be of the comprehensive
type. This is especially important if you have employees who
drive for your business.
Workers' compensation insurance (formerly called
Workman's compensation) which is required by law in all states,
protects an employer from liability for an accident involving an
employee. This type of insurance will pay for medical expenses
and lost wages for an injured employee and, in cases of death or
disability, provide lump sums or annuities. Maintaining a safe
working environment will go a long way toward controlling the
cost of this type of coverage, but a careless or accident-prone
employee can raise your insurance rates out of the realm of
affordability very quickly. Proper selection and training must
be practiced to minimize this risk. In some states this coverage
is not required for family members who may be working in the
business. Your agent will know if any exceptions apply to your
Umbrella liability insurance is an all-inclusive
option that can cover enormous liabilities exceeding the normal
limits of your basic policy at a fairly low cost. This coverage
is almost always worth considering since it provides a valuable
safety net for you and your business.