Small Business Liability Insurance

Many small businesses struggle heroically to limit costs in any way they can. They have to because they cannot attain the economies of scale of many of their large competitors. To make it in today’s cut throat business environment, a business owner needs to use every device she can to survive.

One place some business owners will try to cut corners and reduce operating costs is by operating with limited, or no, small business liability insurance.

Danger, danger, danger! Such brash and reckless behavior can deal the death blow to a small business owner if she is successfully sued by a third party.

So what liability insurance must a company carry? Well, all 50 states in the USA require that business owners carry worker’s compensation insurance. This mandated insurance covers a company’s employees in case of injuries sustained on the job. Typically, it covers medical expenses and wages lost as a result of work-related injuries.

In more serious cases where an employee may become disabled for life, workmen’s compensation insurance furnishes the injured employee with a lump sum settlement or an annuity.

Above and beyond workmen’s compensation insurance, businesses are free to carry as little, or no, insurance if they so choose. And many companies play Russian roulette and hope they will dodge the bullet of third party lawsuits which could wipe them out in a heartbeat.

What are the typical kinds of risks small business liability insurance covers?

First and foremost, general liability insurance safeguards a business against third party claims. These claims generally fall into two areas: personal injury or property damage. Consider as an example of personal injury the customer in a small grocery store who slips on a wet floor and breaks his arm. Property damage claims often involve vehicles, property damaged when working on a customer’s premises, goods left to be repaired, and the like.

However, many businesses need to closely assess their other major risks. For instance, if a small business manufactures goods, it might need to seriously consider purchasing product liability insurance. When you consider all the things that can go wrong with a faulty or defective widget in the hands of thousands of lawsuit-happy customers, it’s rash and foolish to be without coverage for these eventualities.

Another general advantage in having general liability insurance is that your insurance company will defend you against claims initiated by outside parties. Of course, they will first decide if the claim is within the scope of the liability insurance you have obtained. As long as it is, they will bring their lawyers to bear to fight and defend you (and themselves) against all claims.

What is the best way to purchase small business liability insurance? First and foremost, deal with an agent or broker who understands both this market, and, ideally, your industry.

And remember, although it’s wise to contain costs, insurance is one area where you don’t want to skimp or cut corners. It’s also wise to pick an agent or broker with whom you have good rapport and one who has a reputation for after sale customer service.

Should your company face a lawsuit, you want to be sure you have an insurance agent who will stand beside you throughout the entire ordeal.

Liability insurance for small pizza delivery business?

Do I need any kind of special liability insurance for a small pizza delivery business? My delivery drivers will drive their own insured cars not company owned vehicles.

As stated in the 2 previous responses the answer is yes. You need whats called Non-owned auto liability. (hired auto is not necessary in this scenario and I think most agents are just accustomed to saying Hired & Non-owned).

Basically you do not own these vehicles but you are still at risk for any potential claims that arise from your employees driving their own vehicles.

Usually non-owned auto coverage is an incidental exposure and very affordable to purchase. In this case it is not because it’s a primary operation and in no way incidental to your business.

Odds are this coverage will be your most expensive insurance cost.

Also as previously stated your employees personal auto coverage will specifically exclude any business ventures. So coverage can not and will not be covered under their policy, so at the end of the day you will be the one getting sued. In fact some personal auto companies will not insure people that do pizza delivery (keep that in mind).

Other then that a standard BOP (business owners policy) covering your liability and small amount of property coverage should suffice along with any state mandated workers compensation coverage for bodily injury/sickness to your employees.

Hope that helps!

Small Business Insurance