Business Liability and Insurance
Operating a small business has its rewards but also carries its fair share of liability, including the potential for slip-and-fall lawsuits, claims for defective products, and even on-the-job injuries of employees. As a small business owner, understanding your liabilities and obtaining the necessary small business insurance policies is critical. After all, a single lawsuit can potentially close a small business for good. The following resources cover a wide variety of small business insurance and liability issues, including how to find an affordable workers' comp plan and insuring a home business.
Business Liability Overview
Liability refers to anything for which a small business is legally bound or obligated, a list that typically grows as a company's revenue grows. Exposure to the following types of liability must be reevaluated on a continual basis:
- Accidents/injuries on company property (slip and fall)
- Employment law disputes (discrimination, wage and hour, workers' compensation)
- Product liability (recalls)
- Vehicle liability (company cars, use of private automobiles for work)
Certain types of businesses carry an inherently higher degree of liability than others. For instance, a roofing company will likely pay a much higher premium for workers' compensation insurance than a flooring company. And the more employees you hire, the greater your chances of being hit with an employment-based lawsuit.
Liability for Employee Acts
Sometimes an employer will be held liable for the actions of an employee, regardless of the employer's intentions or role in the incident. For one, employees are considered to be under the watch and direction of employers during work hours. But also, employers are seen as having much deeper pockets than employees and thus better able to pay a settlement or damages.
Insuring Your Small Business
Since you can't avoid it entirely, one way to limit your liability is to maintain the proper levels of insurance. Just like other types of insurance, you pay a monthly premium in exchange for a specified level of protection. By paying for liability insurance, for instance, your company likely will not have to pay out-of-pocket to defend against an employment-related claim. If a departing employee steals a computer, your property insurance will likely pay for a replacement.
But make sure you conduct thorough research prior to purchasing any insurance policy, since important terms and conditions may be buried in the fine print. Remember, the insurer will often look for reasons to not pay a claim, but it must adhere to the terms of the agreement. In other words, don't assume anything that isn't clearly stated in the contract.
Most but not all states require employers to carry a certain amount of workers' compensation insurance, which is used for compensating workers injured on the job. States have laws establishing procedures for claims and the scope of coverage. Employees typically may claim workers' compensation for any injury or illness caused or exacerbated by their job. This includes work performed outside of the typical workplace or even "off the clock."
To learn more about business liability and insurance for your small business, click on one of the links below.