Why Your Small Business Needs Liability Insurance

As a small business owner, you've learned to keep many plates spinning simultaneously. After all, it often comes down to you to get things done. If you haven't yet, one of the things you might want to tackle is buying liability insurance. Before you say no, read through this article to learn why you might need it.

Does this describe you and your small business?

According to the Insurance Journal, 90% of small business owners aren't quite sure if their business is adequately insured. Nearly 30% of business owners say they don't have any coverage at all, and 51% admit their business is not prepared to face potential risks. Finally, 53% of small business owners say their most significant barrier to buying insurance is this: They don't know which types they need.

Whether your business is in-home or you have a dedicated building, take a look at these scenarios. If any apply to you, you should be carrying liability insurance.

1. You interact face-to-face with clients

No matter where you interact with a client, there's the possibility that injury could occur. It may be something as simple as a slip and fall or as unexpected as a customer picking a piece of candy from a bowl on your desk and choking on it. In either case, coverage can protect you from financial peril.

2. You sometimes visit a customer's property

If your small business takes you to a customer's home or job site, general liability insurance could help you repair or replace anything accidentally damaged. Let's say you're replacing a window at a customer's home. Your ladder slips, and another window breaks. General liability has you covered.

3. You have another person working for you

If you employ another person to work in your small business (even part time), you open yourself up to potential legal issues. For example, if an employee regularly fails to show up for work or makes costly mistakes and you fire them, they could come back with a lawsuit. The suit may accuse you of anything, from sexual harassment to wrongful termination. If you are sued, employment practices liability insurance can help you pay the legal fees and avoid cleaning out your business checking account.

4. You use advertising to promote your business

As original as you may feel your advertising to be, the adage "there's nothing new under the sun" is true. There's little chance of using words or phrases no other company has ever used before. When you get into trouble is when a phrase has been copyrighted or trademarked.

If you use copyrighted or trademarked wording, even accidentally, the copyright or trademark owner can sue you. General liability insurance can help you pay court costs.

5. You want to bid on jobs that require liability insurance

If you're growing your business, you undoubtedly know that some jobs require you to bid on them, and those jobs typically require you to carry liability insurance.

Let's say you own a landscaping business. It never felt "big" enough to insure, and you've worried about the cost of liability insurance. Now, you've heard that your city is looking for a new landscaping company to take care of the greenspaces downtown. The job would change everything, from how much money you'll earn to how many people you can afford to hire.

The time to secure liability insurance is before you need to win a job. Ideally, everything will be in place before bidding begins.

6. Your product could cause injury

If your business involves selling a product, think of any way that product could hurt a person. For example, could someone cut themselves on the item? Is it possible for a child to swallow a small part? Could it catch on fire?

Injury and death sometimes occur in strange ways. For example, in 2011, a 34-year-old woman died after a night out dancing. It wasn't the dancing that killed her. A pathologist determined that she was likely killed due to a reaction to the glue used to apply her hair extensions.

In 1941, American novelist Sherwood Anderson died while on a South American cruise. While eating the olive out of his martini, it's believed that Anderson swallowed a toothpick sliver. As the fragment worked through his system, it damaged organs, causing Anderson's death.

No matter what product you sell, imagine the worst that can happen.

7. You bill clients

Let's say you normally trust your accounting software, but make a mistake on a customer's financial statement. If, at tax time, the customer must pay a penalty due to that mistake, they can sue your business. Professional liability insurance will help you cover the legal costs, leaving you with more money to take care of business.

The three most common types of liability insurance for small businesses like yours are:

• General liability
• Professional liability
• Employer liability

If you're holding off because you're afraid of how much insurance coverage may cost, call an insurance agent who deals with business policies. You may be surprised by how little peace of mind costs.