Why do companies need liability insurance coverage?
Small business owners should consider liability insurance coverage for a number of reasons. Not only is it an affordable way to protect your business and personal assets in the event of a lawsuit, but you will also likely need company insurance for important business contracts.
When is liability insurance needed?
Many companies sign up for insurance as soon as they start doing business. That’s because the moment you start doing business, you could be held legally liable for any mishaps that happen on your business property, including your home office.
Also, business contracts often require insurance. A client might want you to have errors and omissions coverage before you sign a contract, or a condition of your commercial property lease could stipulate general liability insurance before you move in. If you have employees, you’ll need to meet your state requirements for workers' compensation insurance.
Each of the company liability insurance policies listed protects you from having to pay for a lawsuit out of pocket. Continue reading to learn more about common liability insurance policies and what they cover.
What liability insurance does a company need?
Sole proprietors, small businesses, and partnerships generally consider a combination of the following liability insurance policies:
General liability insurance covers third-party lawsuits (those coming from people outside of your company), including slip-and-fall accidents, product liability, property damage to third parties, and reputational damages.
Professional liability insurance (also known as errors and omissions insurance) covers lawsuits over professional mistakes, missed deadlines, or problems with the quality of your work that cause a financial loss.
Workers' compensation insurance covers medical costs and partial salaries of employees injured at work. It also provides liability protections to employers.
Employment practices liability insurance protects your small business from employee disputes over discrimination, harassment, unpaid overtime, and other employment issues.
Cyber liability insurance provides important protection if your business experiences a cyberattack or data breach.
Learn more about small business insurance costs to get an idea of what you might pay in premiums.
Is company liability insurance the same for different business types?
Depending on your business’s structure, there might be variations in your coverage needs. For instance, workers' compensation laws in some states do not require LLCs to have coverage for business partners, and larger corporations may need policies with higher coverage limits than liability insurance for smaller companies or sole proprietorships.
When you fill out an application, you will be asked to provide specific details about your business to determine coverage requirements for where you do business and your needs.
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