When should entrepreneurs consider getting small business insurance?

Small business owners face a daily barrage of risk.  Let professional liability and general liability insurance coverage help share the load.

For entrepreneurs and small business owners, risk is an everyday occurrence.  Will this meeting turn into a project or a waste of time?  Can I keep the staff I need to deliver on contract promises?  What will I do if the economy starts trending down again?  Entrepreneurs, it seems, are fairly comfortable with risk – and many use it as a motivating factor.

But when there’s something you can do to mitigate risk, you should.  That’s where small business insurance comes in.  Both general liability insurance and professional liability insurance are strong tools at the entrepreneur’s disposal that help reduce your risk of financial ruin in the event of an unhappy client, an accident at your office, or  third party claims for bodily injury or damage to someone else’s property.

You may believe that your business doesn’t have enough assets to be sued, or that your incorporated status protects you from personal liability.  But  if you’ve  guaranteed the business’s obligations under a loan or a lease, you could face personal liability if your business can’t withstand a lawsuit – unless you have small business insurance to step in.

While an insurance policy tailored to your situation is preferable, a good “starter policy” with professional liability coverage and small business general liability insurance is a good fit. The professional liability portion is also known as errors and omissions or E&O and is important for businesses like IT/technology consultants, business consultants and marketing consultants for whom incorrect advice or a failure to perform professional services could lead to a lawsuit.  Even if you haven’t made a mistake in your work you can still be sued for professional negligence, and your professional liability insurance policy will cover your legal fees and protect your business from these potentially crippling costs, up to your policy limits.

General liability is also known as commercial general liability or CGL and provides basic coverage for claims alleging  bodily injury, property damage, personal injury, and advertising injury, up to your policy limits. It is important to have a general liability policy if you visit a client’s place of work or clients visit yours, have access to client equipment, write or speak about client businesses, or use third-party locations for business related activities.

In addition to covering the claims listed above, both types of coverage also take care of defense costs – even if the claims are fraudulent.  In other words, if someone sues you for having caused an injury or property damage, or for providing erroneous advice without a real reason, you still have to defend yourself.  If you have PL and GL, you’re protected for covered claims up to your policy limits.

Being an entrepreneur is always going to be a risk-laden adventure.  Why not reduce the pool of potential risks with affordable small business insurance?  It only makes sound business sense.

The contents of this article and the linked materials do not offer legal, business, or insurance advice related to the needs of any specific individual business.  Please consult your professional advisor.


Hiscox specializes in tailoring business insurance for a range of professionals in industries like IT, consulting, photography, architecture, engineering, real estate, beauty, fitness and more.

Sponsored Article Posted by the San Diego Entrepreneur Center

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