When you first start a business, your mind is probably focused on hiring staff, cash flow, and how the company will grow.
One crucial factor you may not have considered is insurance. It's essential to invest in business insurance so that you are personally protected.
You may say, "but I'm part of an LLC, so I don't need limited liability insurance." This is not so. An LLC (limited liability company) is basically where a business combines the features of a corporation and partnership, to reap the tax benefits and liability protection.
However, being part of an LLC won't cover you individually from liabilities. If the business goes under, your personal assets should be safe, but if someone tries to sue the company, or you, being in an LLC won't protect you or help with the financial implications.
Limited Liability insurance protects the individual, not the business. It protects your private and personal assets and is the responsibility of each person in the business to invest in their own individual insurance.
Want to know more? Keep reading.
Why's Limited Liability Insurance Recommended?
As stated above, limited liability offers personal protection from litigation.
While it's true that being part of an LLC offers some protection by separating business assets from personal ones, having limited liability insurance further divides these areas of your life, and boosts personal security.
Furthermore, having this coverage will avert exorbitant legal costs being thrust upon you in business-related litigation. Let's use an example to illustrate:
If you're a dentist who practices alongside other dentists, having your own limited liability insurance is vital in case a patient tries to sue the company. By having this insurance, your business assets are protected in the company.
Therefore, you and your personal assets are protected from a lawsuit involving your company.
What Types of Limited Liability Insurance is Available?
There are several different limited liability insurance options to consider, and not everyone needs every type of coverage. Choosing one that suits your requirements is essential. Below are some options to consider.
Commercial Property Insurance
If your business requires a lot of physical resources, commercial property insurance could be essential to consider.
Before taking out insurance, take an inventory of your business, as commercial property insurance varies enormously depending on the business assets.
Contractors Professional Liability Insurance
If you're about to start or thinking about starting a business that involves building or construction (including things such as architecture and engineering), it's vital you get some type of professional liability insurance as this one.
This type of cover typically protects you from work-related errors, such as claims of environmental impact, as well as lawsuits.
Product Liability Insurance
This type of insurance covers you against lawsuits resulting from malfunction, misuse, or injury from a product produced by your business.
The amount and type of insurance you will need will depend on the kind of products your business makes. For instance, if you're company produces guns, it will probably need more protection than someone who produces cotton wool.
Errors and Omissions Insurance
This is sometimes referred to as Professional Liability Insurance and is usually used by professionals such as consultants or those who offer financial services.
In a nutshell, E&O insurance covers businesses that provide professional services (usually to other companies) and protects them against claims that their service caused distress to them or their clients.
Business Liability Insurance
This type of insurance is ideally suited to small or medium businesses, including single-person services. Business liability insurance protects your personal assets if someone tries to sue you.
Though it helps keep the separation of business and personal, being part of an LLC doesn't provide your personal assets with complete protection.
Employment Practices Liability Insurance
This coverage protects you and your partners from litigations developing from workplace misconduct. This includes wrongful termination, discrimination, and sexual harassment.
Employment Practices Liability insurance is not just for one person, though it can be for individual protection, but for a collective business entity. It is aimed to protect owners from lawsuits brought on by their employees.
Business Owner's Policy
Business Owner's Policy (BOP) is an amalgamation of property and general liability insurance.
It's often purchased by owners of small or medium businesses (SMB owners, as it is sometimes known) who work in their own space, including their home residence.
If your business is from home, or you regularly see clients at your home, a BOP may be the right insurance option for you.
Ready to Purchase Limited Liability Insurance?
There are many different limited liability insurance plans to consider, and it can seem overwhelming. Perhaps you're thinking that it is too much hassle or just another useless thing someone is trying to sell to you.
But be assured that investing in insurance is a sound investment (pun intended). To put it another way, it is better to have it and not need it, then to not have it and find your personal assets at risk, and/or a hefty-priced lawsuit to try and afford.
Choosing the right insurance can seem daunting because it is so important. Know your business well enough to know any risks it could involve. It would also be wise to seek professional advice on what you may need and go from there.
If you have found this interesting, you may want to look at our other articles. Or, contact us today with your questions or concerns, and we'll get back to you as soon as we can!