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Types of Liability Insurance Your Small Business Needs

As a savvy business owner, you are undoubtedly aware of the importance of operating with adequate insurance coverage. You need various business insurance policies to cover the costs accompanying liability claims and property damage. Without insurance, you will have to cover all costly damages and legal claims against your enterprise out-of-pocket.

There are different types of business insurance policies you can take out, but this article will focus on liability insurance. This type of insurance protects you from various risks that may pop up during normal business operations. Specifically, liability insurance protects your company’s financial interest from penalties it may face because of litigation against it and covers the associated legal costs.

Here are the various types of liability insurance and which ones to consider for your small business.

Types of Liability Insurance

As mentioned above, there are various types of liability insurance structured to protect your small business from every possible claim or litigation angle. Some of the most common liability insurance policies include:

  • General liability insurance
  • Employment practices liability insurance
  • Professional liability insurance
  • Cyber liability insurance
  • Product liability insurance
  • Public liability insurance
  • Liquor liability insurance
  • Commercial auto insurance
  • Worker’s compensation insurance

Which Types of Liability Insurance Do Small Businesses Need?

Some liability insurance policies benefit all businesses, while others offer protection against risks unique to specific companies. Therefore, small businesses need all the above-listed coverages, but your specific small business must handpick what applies to your company based on its circumstances and risks.

For example, liquor liability insurance is unnecessary if your business does not serve or sell alcohol. That said, here’s a breakdown of the various kinds of liability insurance policies that could benefit your business.

General Liability Insurance

General liability insurance is a blend of public liability insurance and product liability insurance. Therefore, this insurance will protect you if a person or their property gets damaged while visiting your company or store by paying for their medical bills and lost wages. It also covers damage caused by a product your company makes or sells. In addition, general liability insurance will handle advertising injury, reputational harm, and copyright infringement claims.

Nearly all small businesses need this insurance, particularly if they rent or own an office or commercial space. Many client contracts also require general liability insurance, so you will miss out on a lot if you don’t take out one. This type of insurance is a great way to get essential coverage in one policy.

It is no surprise that many experts recommend it as the sole business insurance to take out if your business can only afford only one type of liability coverage.

Public Liability Insurance

Public liability and general liability insurance are often thought of as the same thing, but this is not exactly true. This insurance is a type of general liability coverage, but you can take it out on its own as its narrower scope best suits your business.

Public liability insurance coverage applies strictly to accidents, property loss, and injuries suffered by members of the public (including customers, delivery personnel, and mere visitors) on your company’s premises. Consequently, you need this policy if your business occupies premises frequented by many people.

Theaters, shopping centers, hotels and resorts, restaurants, white-collar firms, markets, and sporting venues are businesses that need public liability insurance.

Product Liability Insurance

A product liability insurance policy is worth taking if you are a manufacturing business or retailer. Products you make or sell can be defective and potentially harm consumers by causing bodily injury, property damage, illness, and even death. Consequently, this policy covers you against potential damages if your products cause unintended harm and are caught up in a legal battle.

You can purchase it as a standalone policy or enjoy it as part of your general liability coverage.

Professional Liability Insurance

Your business needs professional liability insurance, also known as errors and omissions insurance, if it profits off someone’s expertise or professional services.

Consultancies, architectural and law firms, accounting agencies, engineering firms, and therapists are some of the biggest beneficiaries of this type of insurance. Unfortunately, even the most cautious and experienced professional service providers make mistakes.

Sadly, some clients may not be very understanding if your errors cost them significant revenue, time, or worse. Therefore, this policy is worth taking to protect you from these unsatisfied clients who might want to sue you if you miss a crucial deadline, provide futile business advice, or make an omission in your work. Your professional liability insurance will cover legal defense expenses up to your policy limits, helping you save cash in claims costs.

Employment Practices Liability Insurance (EPLI)

Your small business needs EPLI if it hires, manages, and fires employees. Specifically, this liability insurance covers wrongful acts that arise from your employment process. The most common claims covered under an EPLI policy include wrongful termination, sexual harassment, discrimination, wrongful demotion, privacy invasion, mismanagement of benefits, breach of employment contract, and retaliation.

It covers any attorney’s fees, settlement costs, legal judgments, and administrative expenses your business may incur when an employee sues it.

Cyber Liability Insurance

Many small businesses assume they don’t need cyber liability insurance, but you need this policy because the world has become increasingly digital. Your small business likely uses IT equipment and systems, which can be compromised from data breaches and malware attacks.

These breaches and attacks are quite costly and damaging. 60% of companies fold within six months of falling victim. Cyber liability insurance will help your businesses recover from financial damage caused by data breaches and cyber attacks. It can pay for credit monitoring, customer notification, legal fees, and fines.

Cyber liability insurance should be non-negotiable if your company handles credit card numbers and sensitive data, works in the cloud, or operates in areas like healthcare, retail, and financial services.

Calhoun Agency for Your Small Business Liability Insurance Needs

We are an independent insurance agency and broker with access to a carefully handpicked group of reputable insurance providers. Therefore, we find the best insurance policy based on your needs. We also have over 90 years of experience in serving the insurance needs of our cherished clients in New Jersey and Pennsylvania.

Contact us today at 856.428.8090 to learn more and get started.