Say you’re a furniture repair person operating out of a storefront. Your building floods, destroying your client’s antique sofa—along with your own property, from computers to specialized tools.
Does your business insurance protect against your loss and your client’s loss?
If you only have one policy, the short answer is probably no.
To understand why, we’ve created this short guide comparing liability insurance vs. property insurance. Read on to learn about some of the most popular policies for protecting your small business’ bottom line.
Types of liability insurance
Should a client or third party sue your business, you could find yourself liable for:
- Attorney’s fees
- Court and filing costs
- Investigation costs related to evaluating the claim
So, small business owners often take out liability insurance, which can help protect against the risk of these costs.
Importantly, there are several kinds of liability insurance.
- General liability insurance – This kind of insurance can provide liability coverage for third-party claims of property damage, bodily injury, and personal and advertising injury (including libel, copyright infringement, and other kinds of nonphysical damage).
- Professional liability insurance – Other names for this type of policy include errors & omissions (E&O) insurance and professional indemnity insurance. Whatever the name, these policies can provide coverage for claims of errors and negligence that led to your client’s financial loss.
- Cyber liability insurance – Do you store sensitive customer data? If you suffer a data breach, your customers could sue you for the disclosure of that data and their costs if such data is stolen or improperly used. This business insurance can help you to cover the costs related to the data breach.
Which kind of liability insurance policy do you need? It all depends on the specifics of your small business. Some business types even require liability insurance in order to operate legally in their state or under contract with partners or clients.
- If you’re a contractor or handyman, your licensing board may require that you take out general liability insurance. Likewise, if you’re renting commercial space, like an office, your landlord might require a policy.
- Doctors, accountants, and lawyers may be required to take out a specialized professional liability insurance policy, considering most of the work involves giving advice
However, even when insurance isn’t required, it can help protect you from potential lawsuits. Slip-and-fall accidents can happen in any place of business, and even the most detail-oriented professional may make an occasional error in judgment.
Finally (and unfortunately), someone doesn’t even have to have a good case to take you to court, where you’ll be responsible for the cost of your own legal defense. That is, unless you have liability insurance.
What about property insurance?
As you can see, liability insurance provides protection against potential lawsuits.
But it doesn’t protect your personal property.
Confused? Remember, general liability insurance only covers damage and injury to third-parties. That’s why it’s important to understand the difference between commercial property insurance and liability insurance.
Commercial property insurance can help protect your place of business and the valuable equipment inside it. More specifically, it can help provide coverage in the case of:
- Damage to your place of business and its premises – If someone vandalizes your building, property insurance could help pay for repairs and repainting.
- Damage or loss of the equipment inside – Should a fire blaze through your building, destroying paperwork and supplies you need for work, property insurance could help cover the cost of replacement and repair.
- Business interruption due to physical losses – In a situation like the above fire, you may not be able to resume normal business until repairs are complete. Commercial property insurance coverage could help you manage ongoing costs and recoup lost profit.
What your policy covers all depends on its specific terms. Open peril or special risk property insurance covers all kinds of direct physical loss unless specifically excluded, while a named peril policy only covers the named perils.
If you work from home and already have homeowner’s or renter’s insurance, it might cover your business property. But it’s worth double-checking the specifics of your policy.
Liability vs. property insurance: What type of insurance do you need?
Now that we’ve covered the differences in policies, it’s time to pick insurance that makes sense for your line of work. But when picking an insurance policy for your small business, don’t think of it as liability vs. property insurance. It’s typically professional or general liability and property insurance, because most business owners need both to better protect against lawsuits as well as damage or loss to their own property.
In this case, two is better than one. Especially when just one loss would likely be far more expensive than years and years of policy costs.
Beyond the insurance types we’ve already discussed, you should also check your state’s requirements for workers’ compensation insurance if you have employees.
Workers’ compensation provides coverage for employee injuries, illnesses, and disabilities that result from their work for you. Additionally, it’s considered a kind of liability insurance that protects against the risk of employee lawsuits. Basically, workers’ comp serves as an agreement that employees won’t sue you (since their injuries are already covered). Most businesses with one or more employees are legally required to take out workers’ compensation, although some states provide exceptions.
Protect your small business from liability
Ultimately, start the insurance process by taking inventory of your small business’ specific risks. From there, remember:
- Liability policies cover your legal risk, and can help to cover court costs, attorney’s fees, and damages involving third parties.
- Depending on your industry, you may need general liability insurance, professional liability insurance, and cyber liability insurance.
- Take out property insurance to protect your place of business and the business property inside.
- Check your state’s requirements for workers’ compensation, too.
Are you ready to cover your potential liability? Thimble makes it easy to take out both general liability and professional liability insurance. Designed for small business owners, our insurance is fast and flexible, and bundles the two policies together to create the ideal liability insurance for many professions! Even those who don’t work every day.
Maybe you work seasonally or on weekends only? Take out a policy by the hour, day, or month.
Either way, download the Thimble mobile app or click “Get a Quote,” and breeze through a few questions about your business. After you enter your ZIP code, policy length, and desired coverage limits, we’ll generate an instant quote.
Purchase with a click, put your mind at ease, and get back to work! You can make changes on the go from the Thimble app as your business evolves.
At the end of it all, leave worrying about risk to the professionals. Once you’ve taken out insurance coverage, go back to what you do best—making your small business a huge success!