Liability Insurance vs. Property Insurance
Liability insurance protects you from claims involving third parties, while commercial property insurance protects your place of business and the business contents inside.
Does your business insurance protect you against the impacts of your loss and your client’s loss? If you only have one type of policy, the short answer is “probably not.” To recognize why this is often the case, it’s important to understand the difference between liability insurance and property insurance.
Let’s start with a scenario. Say you’re a furniture repair person operating out of a storefront. Your building floods from a burst pipe, destroying your client’s antique sofa — along with your business property, from your computers to your specialized tools. If you only have property insurance, you may have to pay for the repairs to your client’s sofa. And if you only have liability insurance? You can forget an insurance payment for your computer and tools.
Learn more about the differences between liability insurance and property insurance, and when you may need one or the other.
Should a client or another third party sue your company, you could find yourself facing a mountain of costs, including attorney fees and damage settlements. Small business owners often purchase liability insurance to help protect against the financial impact of claims against their company.
There are several types of liability insurance:
Which kind of liability insurance policy do you need? It all depends on the specifics of your small business. Some states require businesses to obtain liability insurance to operate legally, or they must have insurance under contract with partners or clients. For example:
However, even when insurance isn’t required, it can help protect businesses from having to pay out-of-pocket when they’re hit with a lawsuit. Slip-and-fall accidents can occur 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, which provides your legal defense and investigation of claims.
Commercial property insurance protects your place of business and the valuable business contents inside and within a 100-foot radius of the scheduled property. More specifically, it can help provide coverage for accidental loss or damage in cases like these:
Your coverage all depends on your policy terms. “Open peril” or “special risk property” insurance covers all kinds of direct physical loss unless expressly excluded. In contrast, a “named-peril” policy only covers the named perils, such as lightning, fire, explosives, etc.
If you work from home and already have homeowner’s or renter’s insurance, it will not cover your business property, so consider purchasing commercial property insurance to protect the items you use for work.
Even the most wide-ranging policies don’t cover everything. For example, liability insurance does not cover:
Liability insurance only provides third-party coverage. That means it will not cover damage to your property or bodily injury to you or your employees. (You need a workers’ compensation policy to cover your employees.)
While property insurance will cover damage to your property, it does not protect your company’s vehicles or company property while in transit. Other standard commercial property insurance exclusions include:
Now it’s time to pick the insurance that makes sense for your line of work. As is often the case for small businesses, don’t think of it in terms of liability vs. property insurance.
Instead, the prudent route typically includes both professional or general liability insurance and property insurance, because most business owners need both. In this case, two is better than one. Thimble’s Business Owners’ Insurance (BOP) bundles general liability insurance and commercial property insurance to protect small
businesses from the financial impact of first-party and third-party risk.
You can start the insurance process by taking inventory of your small business’s specific risks. From there, remember:
Are you ready to cover your business assets? Thimble makes it easy to get liability insurance and commercial property insurance in one policy. Download the Thimble mobile app or click “Get a quote,” and breeze through a few questions about your business. Get covered within minutes, put your mind at ease, and get back to work.