How Much Liability Insurance Do I Need for My Small Business?
Small business is operated with a lot of advantages, but also with a lot of dangers. Granted, slip and fall accidents involving customers or claims of professional misconduct, unexpected incidents can easily spawn lawsuits. This is why liability insurance is among the most important covers that any businessman or woman can have. However, the question that all people would like to know is: How Much Liability Insurance Do I need for My Small Business?
What is Small Business Liability Insurance?
Liability insurance helps to protect your business when you are sued to pay damages, losses to other individuals or their property, or mistakes. There are three major categories:
- General Liability Insurance:
Covers third-party harm, property damage, and ad injury. - Professional Liability Insurance:
Reimburses for negligence claims, errors, or failure to perform services. - Product Liability Insurance:
Required if you are selling tangible goods, insuring against injury caused by faulty products.
Any business can require one or more of these policies depending on what it does. Get the best commercial Summit Insurance here!
How Much Liability Insurance Do Small Businesses Typically Have?
General liability has at least $1 million per incident and 2 million total coverage in most small firms. This has the effect that your insurer will pay up to a maximum of $1 million in one instance and up to 2 million in all instances in one policy year.
However, when the risks of your business involvement are more significant, such as construction, food service, or manufacturing, you may need increased limits or umbrella liability coverage to cover greater amounts.
Factors That Influence the Amount of Coverage You Require
Industry Risks
A consulting company might have lower liability risks than a restaurant or building contractor. Higher-risk businesses should have higher coverage levels.
Client and Contract Requirements
Most landlords, customers, and government contracts demand evidence of liability insurance at certain levels. Always verify contract information prior to configuring your policy.
Size of Business and Assets
The more employees, clients, and income you have, the more exposure. Smaller and larger firms tend to require additional insurance compared to solo operators.
Legal Environment
If you're operating in a province with greater risks of lawsuits or tougher regulations, you may need extra protection.
Read more: Whats Tenant Insurance?
How to Select the Correct Liability Insurance Limits?
- Begin with a minimum of $1M/$2M general liability coverage.
- Talk to an insurance broker who knows your business and can tailor coverage to suit your circumstances.
- Consider umbrella coverage in case you want to have more peace of mind with catastrophic claims.
- Evaluate industry risks. An online service business with low risk won't require as much as a construction firm.
Final Thoughts
How Much Liability Insurance Do I Need for My Small Business? A $1M/$2M policy can be a good starting point for most owners, but larger limits should be contemplated by more risky businesses. The trick is not to spend too much, but also not too little, to cover you.
At Summit Insurance Kelowna, we’re professionals in finding the correct insurance at the correct price for small businesses. Whether you're just starting or expanding, we'll be able to walk you through your coverage options and personalize a policy to protect your business!
