Unexpected Risks That Your Small Business Insurance Should Cover

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Buying a general liability insurance policy is a simple, must-have way to protect your business and personal finances. Small business owners aren't often excited to think about (and pay for) another insurance premium. But small business insurance can cover some surprising (and expensive) costs that you'd rather not pay for out of your checking account.

Here are a few big risks that you can avoid by choosing the right small business insurance policy.

1. Bodily injury and medical expenses

If you own a small business that has foot traffic, like a retail store, restaurant, or any other business establishment or facility that people visit in real life, what happens if someone gets hurt? If someone slips and falls down the stairs at your business, you could end up being liable for expensive bills. This can happen even if it's not directly your fault or caused by any improper actions by your business.

Small business general liability insurance can protect you from this situation. Just like liability car insurance can pay for medical bills if someone else gets injured in a crash with your vehicle, small business liability insurance can make sure you're covered.

2. Property damage

Do you own a small business that operates in other people's homes or on-site at other businesses or facilities? This includes construction firms, contractors, roofers, painters, plumbers, carpenters, or movers. If any of your staff works on site providing professional services, they might end up in situations where client's property is dropped, mishandled, damaged, or broken. In case your small business causes damage to someone else's property, small business general liability insurance can help cover the costs.

3. Lawsuit defense costs

Being involved in a lengthy, expensive, emotionally exhausting lawsuit is a worst-case scenario for many small business owners. Most business owners would rather stay out of court and avoid having to pay lawyers for hundreds of billable hours (and many thousands of dollars). If your business gets sued, general liability insurance can cover the costs of your legal defense -- and can even help pay for costs like lawsuit settlement bonds or court judgments.

4. Libel and slander

Speaking of lawsuits: America has strong legal and constitutional protections for freedom of speech, but not for provably false, defamatory, scurrilous statements about another person or business. If your business gets accused of committing libel (putting out deliberate, harmful lies via words or picture) or slander (speaking deliberate, harmful lies), general liability insurance can help protect you from lawsuits and related costs.

5. Defective products

If your business makes a product that turns out to have problems, quality control issues, design flaws, or defects that cause harm to customers, who pays for those damages? If you have a product liability insurance policy, your insurance company can help.

6. Professional errors

If your business provides professional services, whether you run an accounting firm, consulting firm, or law practice, there might be situations in your career where you make a costly mistake. If you give a client bad advice, fail to notice some crucial details, or otherwise cause a situation that causes economic damage or personal harm to your clients, clients might sue you for professional malpractice.

Professional liability insurance for service-oriented businesses can help protect you from these scenarios. This type of liability insurance is also called errors and omission (or E&O) coverage.

Bottom line

General liability insurance is a must-have type of business insurance for all small businesses. Working with an independent insurance agent can help you find the right liability insurance policy for your small business's needs. Keep in mind that liability insurance is not the same as workers' compensation insurance, unemployment insurance, or disability insurance -- if you have employees, the federal government (and most state governments) require you to have those coverages for your team.

Buying liability insurance for your small business might feel like yet another bill that you're not thrilled to pay, but the peace of mind that you get from these policies can be worth much more than they cost. A lawsuit against your business -- even if the situation wasn't your fault and you have a strong defense in court -- can be ruinous. Small business liability insurance gives your company a priceless safety net for worst-case scenarios. Just like you wouldn't want to drive without car insurance, you shouldn't do business without this financial protection.

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