How to Get Small Business Liability Insurance

Liabilities for small businesses can be widely varied. For instance, your product may injure a client, your business may operate in what is seen as an irresponsible fashion, or any of a number of other fault situations may develop. To protect your assets in such cases, you need liability insurance, which can be used to pay fines associated with liability cases. The cost of insurance can be rather steep, so you may need to shop around to find the best rates for liability coverage.

Difficulty:

Easy

Instructions

1. Determine the level of liability coverage your small business needs by considering such factors as how often liability cases are brought against other companies in your industry and what the typical payouts are in such cases. Some types of businesses need significantly more liability insurance than others.

2. Decide which of the three types of liability insurance you need to get for your company: general, professional or product. Professional liability insurance covers malpractice issues, negligence, errors and omissions while product liability insurance covers any instance of your product harming a customer. General liability insurance covers property damage and injury claims.

3. Purchase liability insurance through a professional or trade association. Group rates for liability insurance can be much lower than if you get it alone. However, if you do work with a group, be careful that no member of the group is likely to have liability issues.

4. Ask your insurance agent or broker whether your insurer offers an insurance package for small business owners. Many agents and brokers do, and liability insurance is typically part of such packages. Many insurers also offer specialized liability insurance for certain types of businesses.

5. Check what is included in an insurance company's policy before you choose specific liability insurance. Many do not offer coverage for legal fees in liability cases, which can be a costly part of the process. You may have to request additional coverage or pick a different policy to ensure that you are fully covered.

Tips & Warnings

• Find out whether liability is required by local laws. Some professionals, such as doctors, are required by law to get and maintain professional liability insurance.

• Don't fall for the common misconception that organizing your company as a limited-liability corporation (LLC) eliminates your need for liability insurance. An LLC can still be held liable in a number of situations.