TUESDAY, NOVEMBER 15, 2011
The world of owning and operating your own business comes with plenty of responsibility and in turn, a heavy dose of accountability. Even if all business owners operate with the best intentions, a client might perceive you did them wrong, and you are now liable for the situation. It is important to keep your business protected with proper insurance coverage.
 Who? Almost 80% of all U.S. businesses are a partnership or sole proprietorship. These two structures put your business and you personally at risk for liabilities. Having a current liability insurance policy will protect you, your family, and the business from financial devastation. If your business is incorporated, liability insurance is still necessary. You can be held personally liable for any of the following:
• you have signed a personal guarantee for a loan
• you have injured someone
• you have acted in an irresponsible or illegal manner
• you do not operate your business as a separate entity than your personal finances
What is it? Liability insurance is designed to protect the business owner from the risks of lawsuits and similar claims for personal injury or property damage. Liability insurance will usually cover legal costs and damages, depending on the policy you purchase. There are three types of liability insurance:
1. General: This form of insurance is the main coverage to protect your business. This may be the only type of liability insurance you need, depending on your business situation. A general policy protects the company’s assets and can be purchased on its own, or as part of another, larger policy.
2. Professional: This is also known as errors and omissions insurance. This policy protects your business against mistakes. A professional mistake might include malpractice, errors, negligence and omissions. For some professions, such as doctors, it may be a legal requirement to carry a policy.
3. Product Liability Insurance: If you sell or manufacture a product, you will most likely product liability insurance. This policy will protect you if a customer is injured as a result of your product. Whether or not you need this policy will depend on the product you’re selling. For example, a clothing store would have far less risk than a hunting store, for example.
It is also important to note that most home-owner policies do not cover home-based businesses, so if your run your business out of your garage, you may be better off to purchase a home-based business insurance policy to cover any damages to your home, family, customers or property.
How much do I need? When deciding what policy to purchase, and how much insurance to carry, there are two important factors to consider: perceived risk and location.
First, think about your business in terms of risk assessment. If you are working with heavy machinery, producing dangerous products such as fireworks or small appliances, you may carry a much greater risk of being sued for personal injury than a paper manufacturer.
Second, review your state’s statute regarding what the business requirements, trends and prices are in your area. It is also important to consider where your business is located; if you run your business out of your home, you may need home-based insurance, if you are providing a service, you may need professional insurance.
Why do I need it? Most law suits, which trigger the need for liability insurance, are the cause of an accident. Business owners do their best to take great care for their clients and customers, but unfortunately, even a harmless accident due to innocent negligence can cause millions of dollars in lawsuits and damages. To keep risk low and insurance rates down, business owners should take precautions to prevent accidents. Take steps such as setting high standards for product quality and employee conduct, keep and maintain clear and current company records, and request additional safety tips from your insurer for your specific industry.
Insurance coverage is available for every risk your business might face. Cost and coverage may vary among insurers, but it is important to discuss your specific business risks with your insurance agent or broker.
By Matt Reynolds - Google+
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