Liability insurance

Because legal costs and medical bills can bankrupt a business, general liability insurance is universally recommended. General liability is often the first policy small businesses purchase, especially if they welcome visitors.

Your specific risks determine the other policies you need, along with any business insurance requirements from laws or contracts with other parties. For example, commercial landlords often require business renters to show proof of liability insurance or list them as an additional insured on their policy.

Remember, a lawsuit could shutter your business. Even if your business wasn't at fault, a customer or other third party could still sue over an accident that happened on your premises.

Liability insurance is affordable for small, low-risk businesses. General liability insurance costs an average of only $45 per month.

General liability insurance covers the most common liability risks, but business owners should consider other coverages as well.

Here's a breakdown of the top liability insurance products for small businesses and the important protections they provide:

• General liability insurance protects against common third-party risks, such as customer lawsuits from a bodily injury or property damage. It also covers advertising injuries, including defamation and copyright infringement.
• Product liability insurance covers claims that a product you manufactured, sold, or distributed caused harm. It's usually included in general liability insurance policies.
• Professional liability insurance, also called errors and omissions insurance (E&O) or malpractice insurance, is required in some industries. It covers your legal costs if a client sues over a professional mistake or oversight, such as a missed deadline.
• Cyber insurance helps small businesses recover from costly data breaches and cyberattacks. Tech companies often buy cyber insurance and E&O together in a tech E&O bundle to protect against lawsuits from clients who might hold them responsible for failing to prevent a security breach.
• Commercial auto insurance helps pay for liability claims if your business vehicle gets into an accident that injures someone or damages their property.
• Employer's liability insurance is included in almost all workers' compensation insurance policies. It provides financial protection against lawsuits brought by employees claiming your business's negligence caused a work-related injury or illness.
• Hired and non-owned auto insurance (HNOA) provides liability protection for personal, leased, and rented vehicles used for business purposes, such as a consultant who drives their own car to meet clients.
• Commercial umbrella insurance supplies additional coverage for liability claims made on an underlying general liability, employer’s liability, or commercial auto insurance policy once the policy limits have been reached.

A small business with low risks won't have to pay a lot for liability insurance coverage. Here are several ways to save money on insurance:

• Shop around. Insurance companies often charge different rates for the same coverage. Fill out our easy online application to compare insurance quotes before buying a policy.
• Choose less expensive coverage options. Policies with lower limits and higher deductibles cost less. However, make sure the limits are sufficient to cover a potential claim, and that you can easily afford to pay the deductible.
• Pay the full annual premium. You can choose between monthly and annual premium payments, with a discount usually offered when you pay the full annual amount.
• Reduce your risks. A strong risk management plan will help prevent accidents, which keeps your premiums low by avoiding claims.

Remember, the cheapest policy isn't necessarily the best choice. Your liability policy should be robust enough to pay for a potential lawsuit, so you don't end up paying for expensive legal fees or other costs out of pocket.