Why Liability Insurance Is a Must for Small Businesses and Freelancers
Small-business owners possess a passion, drive, and entrepreneurial spirit that goes far in building the success of their company. They believe they have the ability to deliver a top-notch product or service, and they work hard getting the business off the ground, spreading the word, and building up a client base.
They may not even consider that some people will be unhappy with their work or that a project may go south due to unforeseen and unavoidable circumstances.
If you own a small business or are a freelancer, it’s critical that you protect yourself with liability insurance. You don’t have the deep pockets of a large organization. If an unhappy client decides to sue and wins the lawsuit, you could lose not only your company, but your home and personal assets as well.
All businesses, no matter how small, face complex challenges before the shingle even goes up. A business law attorney will ensure that contracts and legal issues are taken care of so you can focus on what’s important: providing your clients with a quality good or service that will keep them coming back.
Common Reasons for Business Lawsuits
If you’ve been in business long enough, you’ve probably come to the realization that you can’t make every client happy, even if you produce excellent work. If a dispute does arise, in most cases the two sides will be able to work out an agreement without going to court. But if negotiations fail, the client may sue. There are several general categories for business lawsuits:
- Contract liability: the client does not believe the business owner has held up their end of a contract
- Malpractice liability: negligence, generally applicable to professionals like doctors and lawyers
- Employer liability: if an employee causes damage while on the clock, the employer may be held liable
- Infringement liability: infringement of a patent, copyright, or trademark
- Premises liability: injuries, such as slips and falls, that happen at a place of business
- Payroll tax liability: taxes were improperly paid and withheld for employees
- Product liability: a defective product led to injury
- Infringement liability: infringement of patents, copyrights, or trade secrets
- Negligence liability: a failure to use reasonable care, resulting in injury.
Types of Liability Insurance
Liability insurance is a small investment that can make the difference between whether you lose or keep your business if you get sued. You will have to decide how much coverage makes sense — the higher the policy limit, of course, the more expensive the premiums. When the time comes that you need it, insurance will take care of legal fees, medical bills, and any judgment against you (up to the financial limit of your individual policy).
You can also supplement your primary coverage with a less-expensive umbrella policy that will take care of damages beyond the scope of the primary policy. Liability insurance premiums are tax deductible as a business expense.
General Liability Insurance
Every small business owner or freelancer should have general liability insurance. If a customer slips and falls at your shop or if you make a service call to a client’s house and break a valuable item, general liability insurance will protect you. If you work from home, you should get an in-home general liability policy. Homeowner’s and renter’s policies generally don’t cover injuries to people who are at your home on business.
Professional Liability Insurance
People in certain professions are required to purchase professional liability insurance, which covers professional negligence and is more expensive than general liability insurance. While anyone can purchase one of these policies, they are standard for doctors, lawyers, financial professionals, insurance brokers, and architects.