Short-term liability insurance
Short-term liability insurance can appeal to small business owners who only want to pay for coverage during a project or busy season. However, you can typically save money and get better protection from a year-round policy.
- What is short-term liability insurance?
- What is covered under short-term liability insurance?
- Who needs short-term liability insurance?
- How much does short-term liability insurance cost?
- What does short-term insurance not cover?
- Why you should invest in year-round liability coverage
- Get affordable liability insurance for your small business with Insureon
What is short-term liability insurance?
Short-term liability insurance provides the same coverage as standard business liability insurance for a limited time. While a standard liability policy typically lasts one year, short-term policies can range from a few hours to a few months, depending on the length of a specific task, event, or project.
This policy sometimes comes in the form of:
- Project insurance
- Special event insurance
- Temporary business liability insurance
- One-day general liability insurance
Although a temporary policy may seem more affordable, year-round liability coverage often provides more comprehensive protection, removes gaps in coverage, and can save you money in the long run.
What is covered under short-term liability insurance?
Short-term liability insurance policies offer the same layer of protection as a standard, year-round policy, but for a shorter period of time. This can include:
- General liability insurance: Provides financial protection if a customer slips and suffers an injury at your business, or if you accidentally damage someone's property. Commercial general liability insurance also covers personal and advertising injuries, including defamation and copyright infringement.
- Product liability insurance: Helps pay legal costs when a product that you made, sold, or distributed causes a bodily injury, property damage, or other loss. Product liability is typically included in a general liability policy.
- Professional liability insurance: Also called errors and omissions insurance (E&O), this coverage protects you against client lawsuits over unsatisfactory work. This can include mistakes, missed deadlines, negligence, and other professional service oversights.
- Commercial auto insurance: Helps cover legal fees, medical expenses, and property damage if your business vehicle is involved in an accident. Almost every state requires this coverage for companies that own vehicles.
How does temporary liability insurance differ from standard liability insurance?
Temporary liability insurance usually differs from standard liability insurance in flexibility, coverage, and length of policy period. Here’s a side-by-side comparison of these two types of coverage:
| Short-term liability | Standard liability | |
|---|---|---|
Policy duration | Hours, days, or months | Typically 12 months |
Typical use case |
|
|
Cost structure | Flat daily or hourly rate | Annual premium paid upfront or monthly |
Policy flexibility |
|
|
Claims coverage window | Only covers incidents occurring during the short policy period |
|
Who needs short-term liability insurance?
Short-term liability coverage is generally bought by small businesses that work seasonally or on a project basis. This can include:
- Project-oriented businesses: Event planners, DJ's, and general contractors are some of the businesses that typically work on a project-by-project basis. The time between projects can vary greatly, depending on factors like the market, business location, and services offered.
- Seasonal businesses: Wedding photographers, caterers, and holiday retail vendors are a few of the businesses that have peak seasonal business times. During the off-season, jobs are not as steady or reliable.
How much does short-term liability insurance cost?
Short-term liability insurance can include many policies. Here are some of the average costs for liability policies sold by Insureon:
- General liability: $45 per month
- Professional liability: $88 per month
- Commercial auto liability: $245 per month
There are a number of factors that can affect business insurance premiums, including the length of your policy period. Short-term business insurance policies are likely to be higher than annual premiums.
What factors affect the cost of temporary liability insurance for small businesses?
To calculate the cost of a business liability policy, underwriters consider many factors, including:
- Policy limits: Choosing lower coverage limits can help you save money on liability insurance, but make sure you have enough coverage to handle a potential claim. Setting limits too low could cost you more down the road if your policy can’t cover a pricey claim.
- Deductibles: Opting for a higher deductible is one of the easiest ways to lower your premium—but you must be able to pay the full amount before coverage kicks in. Choose a deductible you can comfortably pay out of pocket so you’re never left without coverage.
- Your industry risks: The type of work you do directly impacts your premium. For example, an Etsy seller with a pop-up shop will need more short-term general liability insurance than one who works from home.
- Location: Regional factors like population density, healthcare costs, and property values all affect your insurance rates.
- Annual revenue: Businesses with higher revenue typically take on more clients and risks, which increases your premium.
- Number of employees: A business with a larger payroll faces a higher risk of accidents and lawsuits.
- Claims history: A business with a clean history of claims typically has lower insurance rates than a company that has filed a claim on its policy.
- Compensation codes: Insurance companies may reference industry class codes to measure a company’s risk when determining premiums. For example, general liability class codes put construction businesses and consultants in different groups, since contractors face a higher risk of injuries and property damage claims.
What does short-term insurance not cover?
Short-term insurance does not cover your business outside of the specified policy period. If a claim or lawsuit arises after your short-term policy expires, you won’t have financial coverage to handle the resulting expenses.
Temporary insurance also won’t cover employee injuries. If an employee suffers a work-related injury or illness, you’d need a workers’ compensation policy to cover medical payments, disability benefits, and legal defense costs. Most states require this coverage for businesses with at least one employee.
Additionally, if you or your employees use personal, rented, or leased vehicles for business purposes, short-term liability won’t help in an accident. You’d need hired and non-owned auto insurance (HNOA), since most personal car policies won’t cover work-related driving.
Why you should invest in year-round liability coverage
Selecting annual liability insurance coverage is typically less expensive and provides more comprehensive coverage, since continuous protection eliminates coverage gaps and won’t impact your compliance with business licensing and contractual requirements.
If you're expanding your business, year-round business insurance is also a smarter option. For example, if a painter wants to turn their side hustle into a full-time operation, they should consider an annual general liability insurance policy or a business owner's policy (BOP), which bundles general liability and commercial property insurance at a lower rate than buying the policies individually.
Businesses that store equipment, inventory, or other property between projects or in the off-season should also get annual coverage. If their short-term liability policy ends, their business property is no longer covered against potential risks, such as weather damage or theft.
How can short-term liability insurance benefit my business?
Short-term liability insurance can come with certain benefits, such as:
- Flexibility for short-term projects or one-time events
- Cost savings for businesses that don't require year-round coverage
- Simplicity for small companies that have specific needs
While there are times when short-term liability insurance might make sense for your small business, it’s important to understand all of your options. One of our licensed insurance agents can help you determine whether short-term or long-term liability insurance is right for you.
Get affordable liability insurance for your small business with Insureon
Insureon's licensed insurance agents are here to help you secure affordable insurance coverage. With just one easy online application, you can compare quotes for short and long-term liability insurance from our top-rated insurance partners.
Once you find the right policies, you can begin coverage in less than 24 hours and get a certificate of insurance (COI) for your small business.
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The average costs on this page were derived from our data on 100,000 small business owners who purchased policies through Insureon. Most of our customers have less than five employees, annual revenue ranging from around $50,000 to more than $200,000, and five years or less in business.
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