May 27, 2024

Thrive Insider

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4 Important Reasons Why a Business Needs Liability Insurance

4 Important Reasons Why a Business Needs Liability Insurance

Liability insurance is an essential part of running a successful business. It protects against claims for bodily injury, property damage, and other liabilities that may arise due to negligence by the business or its employees. It can also provide coverage for libel, slander, and other forms of damage to reputation.

Business liability insurance is classified into three main categories:

General liability insurance: Includes protection against legal liability for injuries and property loss incurred as a result of negligent or other business operations.

Product liability insurance: Provides coverage if one of your products causes an injury or damages a person’s property. This insurance is essential for those businesses that manufacture, distribute, or retail products.

Professional liability insurance: Protects legal claims against your staff or employees due to their actions. This type of insurance is common for medical practitioners, lawyers, accountants, architects, and engineers.

1. Protects Your Assets

Commercial insurance protects your assets from liabilities that may arise. For example, if one of your suppliers sues you for a product defect, your business could lose a lot of money damages. Liability insurance protects against such claims and any awarded damages.

A good case scenario regarding asset protection is where some product injures your client. The individual can then sue your business for damages. The product may be discontinued in such cases. Liability insurance can help you protect your business against such losses.

2. Protects Your Reputation

Another reason why you need liability insurance is to protect your reputation. If you are sued if one of your products is defective or an employee causes an injury, it can seriously damage your reputation. Not to mention businesses thrive in good reputations.

A bad reputation can put you out of business. And having worked hard to build your business, losing it because of minor negligence can be devastating. Liability insurance helps mitigate such risks. It can also help you recover from reputational damage from previous claims against your business.

3. Required by Law

While getting your business covered against liability and risk is a good idea, it’s also a law requirement. Both federal and state laws require that every business buy liability insurance to cover liabilities arising from the business’s operations. If the government understands the benefits of liability insurance, a business owner should pay attention to it.

And it’s not expensive. According to LegalZoom, insurance costs can range from 1% to 3% of revenue for larger corporations but only $500 to $1,000 per year for small businesses. Without it, you may be held personally responsible for any losses that occur.

4. Provides Protection to Employees

Your employees are your assets. They run your business, and you want them to be protected against any liability arising from their actions while on official duty. It may be offering services such as financial advice, helping customers, selling products, or providing services to the public. Your employees represent your business’s name and image in all these cases.

Your business should have liability insurance to protect you and your employees against negligence claims. Not having liability insurance could cause you severe losses.