Running a small business is rewarding, but it also comes with risks. A single lawsuit can lead to devastating financial consequences, even if your business did nothing wrong. Liability insurance protects your company from legal claims, accidents, and unexpected expenses, ensuring that one mistake doesn’t put you out of business.
In this guide, we’ll break down the key types of liability insurance, why they matter, and how to choose the best coverage for your business.
Types of Liability Insurance for Small Businesses
1. General Liability Insurance
This is the most fundamental type of business insurance. It covers:
✅ Bodily injury – If a customer or third party is injured on your premises.
✅ Property damage – If your business causes damage to someone else’s property.
✅ Legal defense costs – Covers attorney fees, settlements, and court costs.
📌 Example: A customer slips and falls in your store, breaking an arm. General liability insurance covers medical expenses and potential legal costs.
2. Professional Liability Insurance (Errors & Omissions – E&O)
If your business provides professional services, this coverage is critical. It protects against:
✅ Negligence claims – If a client sues for mistakes or poor service.
✅ Misrepresentation – If a customer claims they were misled.
✅ Legal fees – Covers the costs of defending your business in court.
📌 Example: A tax consultant makes a filing error, leading to penalties for the client. Professional liability insurance covers the legal expenses.
3. Product Liability Insurance
If you manufacture or sell physical products, you need protection against product-related claims, including:
✅ Defective products – Covers injuries caused by faulty items.
✅ Lack of warnings – Protects against claims that a product didn’t include proper safety instructions.
✅ Product-caused damage – If your product harms property or people.
📌 Example: A kitchen appliance company is sued after customers report burns from an overheating product. Product liability insurance helps cover legal defense and settlements.
4. Cyber Liability Insurance
As cyber threats increase, businesses handling customer data must consider this coverage. It protects against:
✅ Data breaches – Covers the cost of stolen customer information.
✅ Cyber extortion – If hackers demand ransom for business data.
✅ Legal and notification costs – Covers expenses for notifying customers and restoring systems.
📌 Example: A small e-commerce store is hacked, exposing credit card information. Cyber liability insurance covers legal fees and damages.
5. Employment Practices Liability Insurance (EPLI)
This coverage protects against employee-related lawsuits, including:
✅ Wrongful termination claims
✅ Workplace discrimination lawsuits
✅ Harassment claims
📌 Example: A former employee sues for wrongful dismissal. EPLI helps with legal costs and potential settlements.
How to Choose the Right Liability Insurance Policy
✔ Assess Your Business Risks – Identify vulnerabilities based on your industry and operations.
✔ Compare Coverage Options – Don’t just go for the cheapest policy; ensure it covers your potential risks.
✔ Check Policy Limits – Ensure coverage is high enough to protect against worst-case scenarios.
✔ Read the Fine Print – Understand exclusions and limitations before committing.
✔ Work with an Insurance Broker – A professional can find tailored coverage that suits your needs.
How Much Does Liability Insurance Cost for Small Businesses?
Several factors determine the cost of liability insurance, including:
💰 Industry Type – High-risk businesses (e.g., construction) pay more.
💰 Business Size – More employees or customers increase liability risks.
💰 Coverage Limits – Higher limits mean higher premiums.
💰 Claims History – Past lawsuits can raise costs.
On average, small businesses pay $300 to $1,500 per year for general liability insurance. However, specialized policies, such as cyber liability insurance, may cost more.
Conclusion: Protect Your Business Today
Liability insurance isn’t just an option—it’s a necessity. It safeguards your business from costly legal claims, financial losses, and unpredictable risks that could jeopardize your success. The right policy ensures your company remains strong and secure, no matter what challenges arise.
✅ Get the Best Coverage at the Best Price!
At Toby Hansen Agency, we search nearly 100 insurance carriers to find you the best price for the best coverage—guaranteed. Protect your business today with a tailored liability policy that fits your needs.
📞 Contact us now for a free quote!
