Prioritizing business tasks and expenses is critical. Failing to pursue the correct priorities could cause you to unknowingly skip over legal requirements. Some legal requirements have more devastating consequences than others.
For example, if someone brings a lawsuit against your business, skipping over business liability insurance could result in your inability to pay for damages. Ultimately, this will lead to bankruptcy and possibly closing your doors for good.
Why business liability insurance should be your top priority
Running a business means you have legal liabilities and insurance is your only protection.
Imagine being served with papers to appear in federal court for a copyright violation. What would you do? If you have liability insurance, you’d hire a defense lawyer covered by your policy. If you don’t have insurance, you’d pay for your defense out of pocket, neither of which would be necessary if you had general liability insurance.
What general liability insurance covers for your business
A general liability insurance policy covers a wide range of risksfor your business including:
- Personal injury
- Property damage (unintentional)
- Medical payments for accidents that occur on your premises
- Personal liabilities like wrongful eviction, slander, libel, copyright infringement, and invasion of privacy
- Advertising liability injuries
- Legal defense fees and judgments
What general liability insurance won’t cover
Although you’ll get coverage for unintentional property damage, general liability insurance doesn’t cover intentional property damage. Also, most policies don’t cover damage from fires and storms. If you live in an area prone to high winds, fires, or floods, you’ll need commercial property insurance to cover those damages.
Forming a limited liability company (LLC) isn’t enough
Forming an LLC protects your personal assets from business lawsuits and judgments. However, your business structure won’t protect you further. The only way to protect your business financially is to obtain the right types of insurance policies.
Your business needs multiple insurance policies to be protected
Running a business requires taking risks, but insurance policies can help mitigate those risks. For example, you’ll need the following additional policies:
- Professional liability insurance. This policy will cover damages caused by professional advice or services rendered by your business.
- Workers’ compensation insurance. Required by law, workers’ comp pays injured employees on a no-fault basis. If you don’t have workers’ compensation insurance, an injured employer can sue you for their injuries. It’s always better to get covered than to risk a lawsuit.
- Unemployment insurance. Be ready to pay unemployment for any employee you terminate. Unemployment insurance will cover their unemployment benefits. When you have unemployment insurance you don’t have to keep underperforming employees just to avoid paying unemployment benefits.
- Commercial property insurance. If you own the building you do business from, you’ll need commercial property insurance to cover fire and flood damage along with damage caused by other natural disasters.
- Commercial automobile insurance. Do you or any employees drive for the company? You need commercial auto insurance. It’s similar to a regular auto insurance policy, but covers your business when someone is driving for business purposes.
Are your remote employees covered?
One thing you’ll need to think about is making sure your remote employees are covered by your insurance policies. Remote work isn’t new, but the perception of liability is a hotly debated topic. Regardless, you are legally responsible for the safety of all remote team members and are technically required to verify their workspace is safe.
Experts advise conducting a home inspection to make sure your remote employees are working in a safe environment. It’s also recommended to tell remote employees where they can work in their home. It sounds a bit strange to tell someone where they can work in their home, but it’s a move that will cover you legally.
For instance, say an employee works outside on an uneven patio, trips, and breaks an arm. They could potentially win a lawsuit against you since they were on the clock. However, if you told them the only approved work area is their home office, they wouldn’t get far with a lawsuit.
How to get the correct insurance coverage
Although there are many types of insurance policies available, you may not need all of them. In addition to general liability, you might only need the basics like workers’ comp and unemployment insurance. That depends on whether you run your business from your house or from a commercial building, and if you have employees.
The best way to approach business insurance is to document all of your risks and then get policies to cover only what you need. For example, if nobody drives a vehicle on official business then you don’t need commercial auto insurance.