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Small Business Liability Insurance

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Liability Insurance for Small Business

What Is Liability Insurance?

Liability insurance is a type of coverage that protects you from things you can be blamed for. If you're sued for doing something wrong or for not doing something you should have done, liability insurance can cover the legal bills.

For example: say there's a puddle near the entrance to your store. A customer slips, falls, and hits her head. She goes to the ER to make sure she doesn't have a concussion. Whether or not you knew about the puddle, she could blame you for not cleaning it up and thus causing the incident – and your liability insurance could pay her medical bills.

Think of liability insurance as the rich uncle you never knew you had. It provides financial backing when things go wrong so you can act fast and prevent small problems from becoming big ones. It empowers you to take care of the people who matter and defend your business if it's being challenged.

It may also help to compare liability insurance with property insurance: liability insurance helps out when intangible things go wrong, and property insurance helps when there is physical damage to your possessions. Read our blog post "Liability Insurance vs. Property Insurance: What's the Difference?" for more details.

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Liability insurance can cover the bills if you're accused of doing something wrong.

Which Liability Insurance Policies Does My Small Business Need?

Let's say you run an advertising agency next door to a bakery. You and your neighbor won't need the same type of liability insurance. Sure, you could both be blamed for a customer injury, but the bakery gets a lot more foot traffic, which means more potential accidents. The flip side, though, is that your customers are more likely to say you made a mistake that cost them money.

Nearly every small business needs some kind of liability coverage because every business has some level of risk. And realistically, you'll eventually work with someone (like a landlord, client, or business partner) who will ask you to have it.

The trick is figuring out which policies match your risks. This chart highlights the most popular liability insurance policies for small businesses and explains how they can protect you when someone accuses you of wrongdoing.

Types of Liability Insurance Policies

Who's blaming you? For what? What's covered?
Customers & other non-employees Physical injuries & damage to their property Lawyers' fees, court costs, settlements, judgments
Customers & clients Making mistakes that cost them money Lawyers' fees, court costs, settlements, judgments
Current employees On-the-job injuries & illnesses Missed wages, medical bills, death benefits (if the employee is killed)
Current, former, and potential employees Hiring & firing violations, discrimination, harassment, and other civil rights violations Lawyers' fees, court costs, settlements, judgments
Customers and clients Exposing their personal data in a breach Credit monitoring, customer notification, good-faith PR campaigns, responding to a breach, cyber extortion payments
Employees, regulators, third parties – you name it. But they're blaming your board, not you directly. Misusing funds, civil rights violations, and unfair business practices Lawyers' fees, court costs, settlements, judgments
Anyone drinking on your premises Injuries & property damage related to drunken behavior Lawyers' fees, court costs, settlements, judgments

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75% of businesses in the US are underinsured by 40 percent or more. Source

How Do I Get a Certificate of Liability Insurance?

A Certificate of Liability Insurance is an insurance policy's proof of purchase. In order to get a certificate, you have to buy a small business liability insurance policy.

Why might you want a certificate? It's a pretty common request from people who have a stake in what happens to your business. For example: your landlord might want to see a Certificate of Liability Insurance for your General Liability policy. A client might want one for a Professional Liability Insurance policy.

To get an idea of what they're asking for, download a sample Certificate of Liability Insurance [PDF].

If you buy a small business liability insurance policy through Insureon, you'll be able to download a certificate whenever you need one from your customer portal.

How Much Does Liability Insurance Cost?

The biggest factor that affects how much liability insurance costs is the type of policy you're buying.

Other things affect the cost, too: your industry, how many employees you have, how big your business is, and more.

On average, though, Insureon customers spend…

  • $48 per month for General Liability Insurance.
  • $83 per month for Professional Liability Insurance.

Workers' Compensation Insurance requirements are determined by state law, so your costs depend on where you live.

Whatever you pay, though, the cost of liability insurance is far less than the cost of a lawsuit. The Court Statistics Project reports that a liability suit that goes to trial can cost $54,000.

Want more information about the cost of liability insurance? Take a deeper dive on our Business Insurance Cost Analysis.