Small businesses, especially ones that have recently opened their doors, are keen to keep costs to a minimum. This is often beneficial should initial sales require longer to generate despite business costs stacking up. Nevertheless, care must be taken not to cut too far, and being underinsured is one cut to avoid. While some insurance types are required, others are optional. Such is the case with general liability coverage.
In this article, we consider whether it’s worth taking it out for small businesses.
What Does General Liability Insurance Cover?
The idea with general liability insurance is to protect the business from liability and potential damages relating to third parties.
For instance, when an employee goes into a customer’s home to perform repairs but ends up damaging an internal wall in the process, there’s a potential claim for damages. The aggrieved party may pursue a compensation claim or hire a lawyer to seek legal remedies.
Another possibility is that a visitor to the office has an accident while there. They’re not covered under mandatory workers’ comp insurance because they’re not an employee. General liability insurance can ensure that the insurer ultimately pays for their medical expenses. The level of coverage and specifics of these policies is essential.
Risk of Copyright Infringement
Small companies sometimes don’t have all their systems in place yet. As a result, some important aspects may slip through the net.
One example of this is copyright infringement. While fair use policies allow for the limited quoting of copyrighted material for reference purposes, using prior work extensively is not permitted. Therefore, the use of an article from another website by mistake can create a copyright infringement issue. General liability policies protect against this risk factor.
Judgments and Settlements
Over a third of small businesses get sued annually. It doesn’t necessarily even matter if someone within the company has done something wrong. Perceived wrongdoing – rather than an actual one – is sufficient to initiate a legal response.
Companies of all sizes must be prepared to respond to legal challenges when they arise. General liability coverage can manage the legal costs for an initial defense through to a court case. Eventual settlements or a judgment from the court are also something that a policy handles up to the limits set within it.
While a business owner may believe that their business won’t ever be sued because they act responsibly, that’s only half of it. Perceived wrongdoing is all it takes to get into a legal tussle. The cost to resolve even an unfair case can be surprising for business owners who haven’t had legal troubles before.
It’s difficult for a business to avoid the risks that general liability insurance aims to protect against. There’s always the potential for legal disputes, misunderstandings, and genuine cases like accidental property damage or reputational harm. Taking on additional insurance to protect from extra risks in business is often valuable to protect the downside.