Liability Insurance for Small Businesses

What Is Liability Insurance?

Liability insurance protects businesses from legal claims arising from any accidents they are liable for. Those claims are usually premises liability claims, or claims that arise from accidents that take place in their premises. All businesses, regardless of their size and level, mostly need this insurance; however, small businesses often need this insurance more than large-scale corporations do. Large-scale corporations mostly have enough assets to cover litigation costs without having to injure their finance. Small businesses, on the other hand, are financially more fragile. They are often not ready to use their assets to cover those costs. Liability insurance is useful for them because it protects their assets by providing reliable coverage to those costs.

insurance word on business folder showing risk management concept

Is Liability Insurance Expensive?

The costliness of liability insurance is relative, but its annual premium is absolutely much cheaper than the expenses that businesses have to make when they are dealing with liability claims. About 40 percent of small business owners in the United States state that they are not interested in purchasing liability insurance because they cannot afford it. Considering how comprehensive the coverage that this insurance offers, it is indeed relatively more expensive than other types of insurance business owners often use. However, it is important to know that the cost of this insurance can always be tailored to small business’s needs and financial capacity.

How to Buy Affordable Liability Insurance for Small Businesses

Liability insurance for small businesses doesn’t necessarily have to be too expensive to buy. Business owners can make this insurance more affordable if they know the following factors that determine the price of a liability insurance policy.

1. Business size — Liability insurance is more expensive for larger businesses and cheaper for smaller businesses because the size of business premises is equivalent to the likeliness of accident. For small business owners, this is obviously a good news.

2. Business type — Business type also affects the likeliness of accident. This is the reason why construction industries, which are regarded as high-risk businesses, have to pay higher premium than that paid by a consultant who works in a place with no dangerous object.

3. Premise condition — Businesses running in old derelict building obviously have to pay higher premium. Small business owners thus have to make sure that the building where they run their business is perfectly taken care of.

4. Experience — Experienced business owners are often more capable to handle crises more skilfully. Some insurance companies may question their clients’ experience when the latter want to buy a policy.

5. Limits and deductibles — Liability insurance with higher limits and lower deductibles is obviously more expensive. Small business owners can customize their liability insurance so that they can buy an affordable policy with reasonable limits.

6. Claim history — Insurance companies will often take a look at their clients’ claim history. Any previous claims will mostly affect how the price of the insurance is determined.

By understanding how the price of liability insurance is determined, small business owners actually don’t have to worry about its price because they can always modify their policy to make it affordable and reliable enough for them.