Commercial liability insurance covers you for risk. Every business has some form of risk. Your risk may be so small you may not need to buy insurance. But before you make that decision for yourself, you need to know what liability insurance covers you for.
The first type of insurance you need to consider is General liability insurance. GLI covers you for accidents that damage property and injure people. There are many documented cases of millions of dollars in damages being awarded as a result of claims being brought against businesses. If you think big business is the brunt of these lawsuits, you're mistaken. Many small businesses have also been sued and been forced to pay $1 Million dollars in damages or more.
If you are a store owner that has a physical location where customers visit, you probably need GLI. If you are a building contractor or other type of independent contractor who works with expensive material or around other people, chances are you will need at a bare minimum, a general liability insurance policy.
But this policy may not be enough...
If your business gives professional advice and services, then you may also need another form of commercial insurance, called Professional Liability Insurance. This is sometimes called Indemnity insurance or Errors and Omissions Insurance.
Professional liability insurance is different than GLI but most businesses buy these polices from the same insurer. Professional liability insurance covers you for things like failure to deliver services as promised, and damages from mistakes.
Here's an example of why it is important to consider both of these types of insurance...
Let's say you run a small computer shop in your town. Customers come to you with computer problems and to buy your custom made computers and retail accessories. One day a customer is in your shop and trips over a printer cable that one of your workers left sticking out from behind a counter. They hurt their back and they are out of work for months, costing them thousands of dollars in lost wages. In addition, they have some $50,000 in medical bills that their health insurance provider will not pay, since their attorneys determined it was your fault.
Guess who's liable in this unfortunate situation? That's right, your company -- otherwise knows as YOU. In this case, if you have general liability insurance then your insurance company would cover the cost of the settlement or judgement. The policy would also cover the legal costs involved with the case. Without this policy, you could personally be responsible for all the damages as well as the legal fees.
Now let's say you had GLI and you were covered for everything from that claim. Great news, right? No so fast Bucky...
Remember that employee who was somewhat responsible for the accident? Well he was so flustered that morning that he formatted the wrong hard drive and lost all the data on your most important client's laptop. Years of crucial data, family pictures and videos, business spreadsheets, passwords, credit card information and more. All wiped out in a flash.
Does general liability insurance cover you for that?
Sorry, it does not.
For something like that your business would need professional liability insurance. Remember, that's the policy that covers businesses and contractors for mistakes. And this was a big one. The client wants $100,000 for damages in lost time and business due to the data being wiped out on his computer. Many small businesses cannot absorb a loss of this magnitude and many companies have had to close up shop due to claims like this. Don't let this happen to your business.
Now that you know what types of Commercial Liability Insurance policies are available to you and what each covers, you can prepare for situations like this. Consult with an insurance agent or broker who handles business policies and determine the types and levels of insurance that are appropriate for your specific needs. Invest in the right policies and you'll have peace of mind knowing you are covered for anything that might happen.
