Being an entrepreneur isn’t easy. The role is accompanied by lots of responsibilities. Besides ensuring your customers receive quality products, protecting your business from all kinds of risks is also your responsibility.
Statistics show that 12 million lawsuits are filed every year against small businesses. On average, a liability suit costs a minimum of $54,000. Considering that small business owners start a business on a shoestring budget, the financial hits of litigation can put them out of business.
How do you safeguard your business from legal claims that could shut down your operations? By purchasing commercial liability insurance. With such insurance, your business will be protected from liabilities and unforeseen circumstances.
However, choosing the right insurance policy is easier said than done. To ensure you invest money in the right policy, we’ll delve into a few tips that you must consider when buying commercial liability insurance.
#1 Identify the Risks
Before you buy commercial liability insurance, it’s important to figure out the risks your business faces. While risks vary by industry, theft, property damage, lawsuits, and employee accidents are common risks every business is exposed to.
Suppose you run a hospitality business. Operational hazards such as falls, slips, and trips are common in the hospitality industry. Having an insurance policy in place that covers bodily injury will ensure you don’t have to cover medical expenses out of your pocket. Besides, the right insurance policy will cover potential legal claims.
Likewise, sprains, strains, and tears are common in the manufacturing industry. You could save some serious money by purchasing an insurance policy that offers coverage for workplace injuries.
#2 Consider the Type of Insurance You Need
There are a multitude of insurance policies that businesses can invest in to ensure smooth operations and avoid legal repercussions. However, you will benefit from insurance only when you purchase the right policy.
To help you out, here are the most common types of commercial liability insurance that you must invest in:
- General Liability: This insurance policy offers coverage against claims of property damage or bodily injury that occur due to the products, services, or operations of a business. As it provides broad coverage for common risks, it’s the first type of insurance you must invest in. In fact, many businesses, especially small ones, need only general liability insurance. However, purchasing the right coverage is important.
- Product Liability Insurance: This type of insurance covers businesses if their products cause damage or injury to people. Product liability insurance is a must-have for wholesalers, manufacturers, retailers, and distributors.
- Workers’ Compensation: All states but Texas mandate businesses to have workers’ compensation, so you must purchase it. This insurance policy pays benefits to workers who become disabled or get injured at the workplace. Besides, it protects businesses from costly lawsuits related to workplace injuries, as employees waive their right to sue you for damages.
While these insurance policies are essential for every business, factoring in your state law will be wise. We say so because some states mandate certain types of policies, whereas others leave it at the discretion of business owners.
#3 Understand the Coverage Limits and Exclusions
Certain insurance policies have limits on the amount they will pay out. They may also not cover the potential losses your business is exposed to. That is why it’s best to understand the amount of coverage offered, including exclusions and limits.
Let’s say you run a retail business involved in selling products and handling cash. In that case, you must make sure that your cash is insured. Not only that, but you must have protection in place for things like robbery and employee theft.
If you opt for a policy that insures your cash but doesn’t offer coverage against employee theft and robbery, it would be of no use. In case things go wrong, they will take a hit on your finances. Your business operations may also come to a halt.
As such, Commodore Insurance Services Inc. advises businesses to review the policy exclusions carefully to understand what incidents aren’t covered by the policy. That way, you can buy more coverage to ensure that your business is adequately protected.
#4 Work With a Reputable Insurance Provider
Coverage isn’t the only thing you should look for when buying commercial liability insurance. The reputation of the insurance provider is equally important. Many businesses commit the mistake of going for insurance providers that dominate the airwaves. You shouldn’t do that.
One way to determine if an insurance company is trustworthy is to check customer reviews. Browsing the insurance provider’s website is well worth it, but checking third-party sites will give you a clear picture of their reputation.
Also, check if the website features robust resources to educate customers on insurance. Such insurance providers really care for their customers, meaning working with them will be a pleasant experience.
Purchasing commercial liability insurance isn’t a one-time thing but an ongoing process. As your business grows, so will the risks. That means you will have to update the insurance to ensure it’s adequately protected.
If figuring out the right type of commercial liability insurance, depending on the business’ size, seems difficult, getting in touch with an experienced insurance agent will be the best bet. Not only will they walk you through the process of purchasing insurance, but they will also advise you on the type of policy you need.