General liability insurance is designed to protect your business from being held financially responsible for: injury, damage to others’ property, slander and libel, and false or misleading advertising. Although this may seemingly be enough, there may be gaps in your coverage that can put your business at great financial risk. Our Insurance Buyer’s Guide points out, “… Small businesses pay about $20 billion each year in legal costs out of pocket- costs that in almost all cases that would be covered by insurance.”
Even if you operate as an LLC or are incorporated, you may still be held liable for personal injury as well as illegal or negligent behavior. Examine the following types of insurance to determine whether they fulfill a gap in the liability coverage you currently operate under.
If you create or sell a product to customers, there is always the likelihood that that product can cause injury or bodily harm. Depending on what type of product it is – an electronic device vs. jewelry vs. baked good – it will come with a certain amount of risk. Product liability insurance protects you in the event that your product causes injury or illness to your customer.
- Food products should always be insured, as they carry the risk of bodily harm through foodborne illness or food allergy.
- Your product does not need to be a tangible item in order to cause injury, and injury does not always equal bodily harm. If you design a software program that increases your customer’s risk of being hacked or downloading a virus, you can be held liable for that damage.
Depending on your profession, you may need to consider investing in professional liability insurance, otherwise known as Errors and Omissions Insurance. Some states require that certain types of businesses carry this as they are more at risk than others; doctors and lawyers, for example.
- PLI covers your business against “malpractice, errors and negligence” in the services you offer your customers. This is a good insurance to pick up if your business offers legal, tax, or medical advice to your customers, or provides services ranging from massage therapy to tax assistance.
Pollution and Environmental
Does your business engage in manufacturing or construction? Do you work with heavy metals or other possible pollutants? Do you produce a lot of excess waste? If so, you may want to consider Pollution and Environmental Liability Insurance. Damage to the environment caused by your business practices is rarely covered in your general liability insurance policy.
- If there is an environment accident on your property such as a sewage leak or chemical spill, this specific type of insurance can protect you from the expense of cleaning up your property. It can also protect you in the event of any lawsuits arising from said accident, brought on by injured employees or the EPA.
Finally, Employment Practices Liability Insurance protects your business and workers from lawsuits brought on by current, prospective, or former employees. If your industry is high-risk or typically has a high turnover rate, you might benefit from this type of insurance.
Besides general liability insurance, most states also require that businesses with employees pay workers’ compensation insurance, unemployment insurance, and disability insurance. In certain industries, state law may require that your business is covered by a more specific form of liability insurance.
Your bank, financial lender, or investors may also, as part of your loan contract, require you to purchase life, business interruption, fire, floor, or other insurance in order to protect their investments. Make sure that you have all the coverage you need to protect your business in case of an accident, natural event, or other disruption.
Bio: Megan Webb-Morgan is a business blogger for ResourceNation.com, a leader in the B2B lead generation industry. She writes on a variety of topics including business insurance and startups.