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• Understanding Small Business Insurance
• Best Small Business Insurance 2024

What Does Liability Mean for Businesses?

In business terms, “liability” is a legal obligation to settle debts or responsibilities arising from losses. Often brought up in lawsuits, these liabilities can impose significant financial burdens on a company. Business insurance provides a safeguard, helping businesses address these costs without jeopardizing their financial health.

Insurance for Your Small Business – Transcript

A business owner needs to be prepared in the event of disaster. When accidents, injuries, negligence, theft, or other losses occur in a professional situation, the business and their owners can often be held liable for these losses. And the best way to prepare for unforeseen problems is with insurance. 

But insurance can get confusing if you dive into the minutia of it. That's why we're going to cover everything that you need to know about business insurance in this video. 

Hey, everybody Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a larger course dedicated to helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds like it'd be really useful to you, be sure to like and subscribe. 

So what does it mean to be liable? A liability is a legal responsibility to settle financial debts or obligations to those affected by a loss. Typically, this happens in the form of a lawsuit and can total amounts greater than the business is able to afford. Business insurance exists to help pay for these liabilities. 

Business insurance doesn't prevent disasters from happening. Rather, it's a proactive solution that helps to protect you from liabilities once a disaster has occurred. Insurance prevents the costs from business mistakes leading to complete financial ruin. 

This video will cover the primary types of business insurance so that you can protect your assets and your business. And we'll list some of the more specialized policies available. We'll also share some agent resources to help you secure the perfect insurance policy for your small business. 

The term “business insurance” isn't actually a specific type of insurance policy. Rather, it's a term used to describe the specific types of insurance policies that are available to business owners and their companies. 

The specific policies and levels of coverage that you require will depend on the size and type of business that you operate. You don't need to know all of the details – qualified agents should be able to help you determine where your liabilities lie and recommend appropriate policies – but every business owner should have a basic understanding of what coverage is available. 

Insurance is a standard cost of doing business, and it's relatively inexpensive compared to the potential impact of a lawsuit. Considering that the cost of a single claim can decimate a company, it's the smart thing to do. Let's take a look at three of the most common forms of business insurance. 

The first is general liability insurance. General liability insurance is the most common type of business insurance as it covers the most basic needs that are shared among all types of companies. Things like bodily injury on your business's property and physical damage caused by employees are covered by this policy. If you're not sure which types of insurance your company needs, you should look here first. 

But bear in mind: general liability does not cover employee injury, which brings us to the next common type of business insurance: workers’ compensation insurance. Workers’ comp is meant to protect the interests of your employees if they're injured on the job. It can also help to protect your business from a lawsuit if that employee needs additional compensation for their injuries. If you have any employees, you likely need this coverage. Almost all states have laws requiring workers’ compensation insurance. 

And thirdly, there's professional liability insurance. Also known as “errors and omissions insurance,” professional liability insurance is a policy that's meant to protect professionals in the workplace. Expert advice given by you or your employees may not always lead to the desired result. If your guidance is deemed inaccurate, negligent, or fails to deliver on agreed-upon results, it can leave you open to liabilities if the client is financially damaged and blames the company. Professional liability insurance is essential for providers of professional or expert advice. Real estate and insurance agents, financial advisors, and other coaches and consultants can all benefit from this type of insurance. 

Aside from these fundamental types of insurance coverages, there are also specialized policies available. They're typically specialized to match the unique needs of different businesses. 

Some of these include commercial auto and property insurance, which are similar to personal auto and homeowner's insurance policies, but they're for professional vehicles and workplaces. 

Business interruption insurance compensates your business with a percentage of lost revenue in the case of a catastrophe that causes the business to shut down.

Product liability insurance covers physical or other harm to a customer that is caused by a product that you manufacture or sell. 

Home-based business insurance covers gaps in your homeowners insurance policy if you run your business out of your home. 

And data breach insurance covers some of the damages in the event that your customers' data is breached or stolen.

To simplify administration and save money, you can consolidate your coverages with a business owner's policy. This is a group of insurance policies tailor-made for small businesses. These packages typically include general liability, commercial property, and business interruption insurance, and they can be customized to your business’s specific needs. 

How much does insurance cost? Insurance companies use several factors to calculate your monthly premiums. Some of the well-known aspects include type of coverage, number of employees, the geographical location of your business, industry, financial stability, and existing safety and security features of your building, vehicles, and equipment. 

As you shop between providers, you'll find that the amount of money that you pay to be insured will not only vary between providers but also based on the amount that your business would be covered if a negative occurrence arose. So be sure to work with a representative who can clearly explain the costs and benefits of any coverage that you select for your business. 

It's estimated that small businesses pay anywhere between $14 and $124 per month for any one kind of insurance coverage. Here's a chart that shows you the average cost of popular types of coverage. 

Where to get insurance. There are lots of options for insurance providers out there, and we encourage you to shop around your insurance needs to different providers so that you can find the best insurance provider for your business. 

We cover business insurance in greater detail, review insurance providers, and list out the best insurance providers for various businesses on our website. We've provided a link below where you can review this content as well. 

In conclusion, your business needs insurance. This fairly modest investment will both protect your business and your personal assets from the inevitable liability issues that arise from mistakes and disasters. 

Now that you've seen the basic types of business insurance policies, you can learn more about each one in detail at our website. Check out the links below for over 300 business ideas with detailed insurance breakdowns of what policies and coverage you'll need. We also provide recommended agent links to speak directly with a specialist who will help you get the best rate on the policy that your business needs. 

This video is part of a step-by-step course that gives small business owners all of the essential information for starting and operating their business. We’ve provided a link below this video for you to get access to all of the free and discounted business tools that we mentioned in this course. 

Be sure to like and subscribe to get more of this content. We’ll see you in the next video, and if you have any questions, let us know.