Liability Insurance For Small Businesses in the United States of America
Insurance experts recommend several types of small business insurance policies. The most common is general liability insurance, which covers third-party bodily injury and property damage. Other options include professional liability insurance (also called errors and omissions) and commercial auto insurance.
Many small businesses buy a business owners policy (BOP) that bundles general liability and commercial property insurance into one. These plans are often cheaper than buying each type of small business insurance individually.
General Liability Insurance
Whether it’s an injured customer or a lawsuit, serious property damage or injuries can bankrupt a small business in a matter of minutes. That’s why most small businesses purchase general liability insurance, one of the most common types of business insurance.
The policy covers expenses such as medical costs and legal fees if your business causes bodily injury or property damage to customers or third parties. It also pays for repairs or replacement costs if your business accidentally damages property that doesn’t belong to it. And it helps cover the legal cost if your business is accused of reputational harm, false advertising or copyright infringement.
When shopping for the best general liability insurance, consider your business type and location. For example, a construction company may face more liability risks than a retail store. Also, consider purchasing a combined commercial general and product liability policy or a business owners policy (BOP). The combination of coverages can save you money on premiums. Then, ask trusted colleagues or industry professionals for recommendations and check online reviews. Finally, talk to multiple insurers to understand the fine print of their policies.
Professional Liability Insurance
Unlike general liability insurance, professional liability protects you from claims that your company’s services or advice have led to financial loss for a client. Also known as errors and omissions (E&O) insurance, this policy can help pay for legal fees, settlements or judgments up to your policy’s limit. It’s a must-have for any consultant, adviser or contractor. Many clients may require you to show proof of this coverage before they’ll hire your business. And the IRS considers premiums for this type of small business insurance to be tax deductible.
The best small business insurance companies offer a range of policies to meet the specific needs of your company. NerdWallet’s ratings are based on an editorial team’s evaluation of coverage options, customer experience, customizability and cost. For an in-depth review of a provider’s products and pricing, read NerdWallet’s full small business insurance ratings. We recommend comparing quotes from multiple companies to find the best deal for you. Business owners can get started with a free quote. It only takes a few minutes and no personal information is required.
Employment Practices Liability Insurance
Employment practices liability (EPLI) insurance helps cover legal costs for claims against your business related to wrongful termination, sexual harassment and other workplace-related issues. Often bundled with directors and officers (D&O) insurance in a management liability package policy, EPLI also may be available as a standalone coverage.
The number of employment-related lawsuits against small businesses has increased dramatically as laws have been adopted that give employees more protections and rights in the workplace. These lawsuits can be expensive to defend, and if the company loses, it could sink the business.
NEXT offers a comprehensive EPLI insurance product through Nationwide for businesses with between 10 and 150 employees. EPLI is usually a claims-made policy, which means that it only pays for claims made while the insurance is active — not for claims reported before the coverage began. The cost of EPLI can vary significantly, depending on the type and size of your business, your historical employee turnover rates, and whether you choose to purchase D&O and workers’ compensation insurance in the same policy. The deductible you select will also affect your cost.
Commercial Auto Insurance
Commercial auto insurance provides liability and physical damage protection for any vehicle that your business uses to conduct its business. This typically includes cars, vans and larger commercial trucks. It can also include coverage for equipment that may be in the vehicle or transported on the truck. Some policies also offer additional specialized coverages such as auto lease gap insurance (coverage for the difference between the outstanding loan balance and the cash value of the vehicle in the event of a total loss), hired and non-owned auto insurance (coverage for vehicles your employees rent or borrow while on company business) and blanket added insured coverage.
In addition to traditional commercial auto policy options, some insurers like Progressive now offer a “business owner’s policy” that bundles general liability and property coverage into one package. This makes it easier and less costly to get the coverage your small business needs to meet contract requirements or protect against common third-party lawsuits. Some businesses can even qualify for loss control services, which can help reduce the frequency and severity of claims.
Commercial Property Insurance
If your business owns real property or physical assets, commercial property insurance is a must. It protects against damages and theft of that property, and covers the costs associated with repairing or replacing it. It also covers inventory, furniture and fixtures, technology and other equipment. Depending on the policy, it may also cover business interruption expenses.
Commercial property policies are often combined with general liability insurance into a business owners’ policy (BOP). A BOP usually costs between $59 and $72 per month. Licensed agents can help you find commercial property and liability policies that meet your needs. They are paid a commission by insurers when they sell you these policies, so it is important to shop around before choosing an agent.
Your business’s location is a key factor in determining how much commercial property coverage you need. For example, buildings located in cities or areas with good fire protection typically cost less to insure than those in rural areas prone to natural disasters. You can also add an optional endorsement for equipment breakdown insurance, which covers the repair or replacement of malfunctioning machinery.