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As a small business owner, you inevitably face some level of risk on any given day—a person falling, a product going defective, or an accident occurring. This is why everyone needs liability insurance—you know, for liabilities. Insurance covers your business from the various claims for the many different things that are thrown your way.
Common types of liability insurance
Naturally, the type of coverage you need depends on your business and industry, since each job has its own unique risks and risk levels. As such, there are different types of liability insurance policies with each covering its own unique risk pool. It’s important that you know what these various policies are, why they matter, and whether or not your business needs them.
There are three primary types of liability insurance coverage. They are:
- General Liability
- Professional Liability
- Employer Liability
General liability insurance
General liability insurance is also referred to as general liability business insurance or commercial general liability insurance. This type of insurance policy is a must-have for every business because it can help shield the business owner and company from liability to third parties. Despite the fact that it isn’t legally required, you’d be running a huge risk without it, since it can help cover the costs of:
- Evidence costs
- Legal team
- Witness fees
Generally speaking, it insures against the following:
Third-Party Bodily Injury – This protects you from liability in the case that you are sued because a person was injured on your business property or while you’re rendering your services. So, if a client trips on a box in your office and is hospitalized, commercial general liability insurance could help pay for their medical expenses.
Third-Party Property Damage – This protects you if either you or your employees damage a third-party’s property. For example, it would help cover the damages if you were at the client’s home and your equipment damaged the paint and the walls.
Professional liability insurance
Professional liability insurance, also known as an errors and omissions insurance policy (E&O), helps protect your business from negligence claims brought about by errors resulting from your professional services. E&O is limited to jobs where a person is considered an expert or a consultant. In such cases, the professional fails to meet their client’s expectations, resulting in financial losses.
In order to prove this, the client (or in court, the plaintiff) would have to establish the following:
Your line of work has certain professional standards Your work failed to meet these minimum standards The plaintiff suffered financial damages Your rendering, or failure to render, services caused these damages
Examples of businesses that typically elect to purchase an E&O plan include:
- Event planners
- Interior designers
- IT consultants
- Technical Writers
A professional liability policy will offer two primary forms of coverage, including:
Alleged or Actual Negligence – Can help cover the business from actual or alleged errors and omissions during the course of professional services. Typically this includes:
- Bad advice
- Failure to render a service
Legal Defense Related to Claims – Can help pay for legal defense when a liability claim is made.
So, what would a professional liability case look like? Let’s pretend you run a scuba diving operation. During a normal excursion, the boat accidentally returns to shore without one of the customers, leaving them stranded for several hours until rescue. As a result, they miss their next activity and get charged a no-show fee, and they decide to pin it on you. If you had professional liability insurance, even in an at-fault case such as this, both the damages and legal fees could be covered.
Neither a professional nor general liability Insurance policy will protect your employees were they to get injured or sick doing their job. This is where employer liability, often paired with workers’ compensation (or if you’re cool, “workers’ comp”) coverage, comes in.
Most every state in the country legally requires a business with a certain number of employees (typically between 1 and 5) to have workers’ compensation in order to operate. But, even if you’re in Texas where it’s not legally required, it would be wise to invest in this type of coverage. Accidents happen (even in the Wild West).
Workers’ compensation not only makes it virtually impossible for an employee to sue you for negligence resulting in workplace injuries, but it also covers a variety of factors related to work-related injury or illness, including:
- Helps cover the cost of medical bills for employees that get hurt or sick within the course and scope of employment.
- Can help safeguard your business from lawsuits resulting from illness or bodily injury arising out of employment.
- Can assist in disability benefit payments if your employee is temporarily or permanently disabled by a work-related accident.
- Lets employees recoup lost wages that they missed out on while sick, injured, or in recovery.
- Should the worst occur and a tragic death arises, workers’ comp could handle the funeral costs.
So, if your employee developed a lung disease because of chemicals they were exposed to daily at work, workers’ compensation could start by paying for their diagnoses, scans, surgeries, treatment, and recovery. This alone could cost millions of dollars, not to mention further financial tolls resulting from lost work or disability.
Get covered from liability
These days, there’s no excuse to not have all of the coverage you need. In the past, such coverage might be exorbitantly expensive or seemingly wasteful, because it only was needed for a few days out of the month. Especially for the most common forms of business insurance, general liability and professional liability, traditional policies have always been ‘one size fits all.’
Then along came Thimble.
Thimble provides an on-demand liability insurance policy for small businesses that works when you do. With Thimble, you can activate a liability policy for an hour, a day, a week, or a month. Pay for liability protection only when you need it—save when you don’t.
Purchasing a policy couldn’t be easier. It takes less than a minute to get insured. Simply download the Thimble app, input your information and ZIP code, select your plan, purchase it, and you’ll have a Certificate of Insurance in your inbox instantly. It’s never been easier—or more affordable—to help your business reach its full potential.