What to Plan for With No Liability Insurance

Consider this scenario: A customer enters your office, slips on a wet area that has just been cleaned, and gets hurt. He then files a lawsuit against your company for harm done to him. How do you pay for the legal fees and other expenses? Another scenario might be that an employee is injured on the job and files a claim against the company for neglect. Without liability insurance, your business takes the hit from the litigation process, and your personal assets become vulnerable as well.

Being pursued for liability on any grounds is an expensive and involved process. Though many companies can get by without small-business insurance for years, it only takes one claim to wipe out a company and one’s personal assets. That's why obtaining liability insurance should be a top priority for the protection and success of your business.


The Costs of Not Having Small-Business Insurance

Depending on the type of claim and whether it's coming from a customer or employee, the expenses of a lawsuit can vary. However, as the defendant in any lawsuit, costs are always high. Here are some of the costs, and what to expect:

  • The claim will start off with a summons and complaint against you, which will then lead to several meetings that could last up to several hours. This entails attorney fees, including consultation costs, transcript costs, research costs and more, at any hourly rate.
  • Then you move on to the depositions phase, which brings you to a settlement conference that could last several hours. A trial date will be set. Your attorney will charge for the deposition paperwork, time spent and various other fees.
  • The trial takes place, and could last from several days to several weeks. Your attorney charges you hourly, and you are also charged for various legal fees.
  • Some of the many legal fees your attorney could charge you for are: transcript fees, witness fees, court reporter fees, consultation fees, deposition fees, research fees, mailing fees and much more.

If you lose the trial, you'll have to pay the settlement as well as any medical expenses, attorney's fees, and other costs that the prosecuting party encloses. Surely, without some small-business insurance, this will put you and your company in debt, if it doesn't bankrupt you first.

More Costs of Not Having Small-Business Insurance

A lack of small-business insurance can harm you in other ways as well. Along with liability insurance, small-business insurance can provide a number of coverages that help out in case of disaster. Fires, tornados, theft and other incidents could wipe out a business. That's why insurance companies offer protection for your property and its contents through various packages called BOP (business owner's policy), and separate insurances for individual companies’ various needs.

A business owner's policy is a packaged policy that usually includes general liability, property insurance, and business interruption insurance. The BOP is very popular among small-business owners, as it covers bodily injury, any property damage, contents of the workplace, and any loss of profits due to disasters such as fires. Insurance agents often suggest purchasing a BOP and then adding separate insurances on to that policy. Good agents will analyze the daily risks your small business takes and provide suggestions for the types of insurance you should have.

Evade Bankruptcy with Liability Insurance

Purchasing small-business insurance could save your business. General liability insurance can protect your company's assets from a lawsuit filed against you for any type of injury or property damage, and can provide other security as well. Such protection includes:

  • Legal costs: Litigation costs are quite extensive. General liability insurance will cover attorney's fees, witness fees and similar fees. Any court expenses are covered as well.
  • Medical costs: All medical costs are covered for those that might be injured on your property or by you while doing business. Therefore, if a customer were injured in your store, the insurance would cover all associated costs.
  • Property damage: This insures you from any physical damage done to your business property or a customer's property, or for loss of that property. This comes in handy in cases of fire, theft or other accidents that might damage the assets of the business.
  • Business interruption: This type of insurance usually comes as a standard, and is insurance for disasters such as fires. If your business cannot operate due to a fire, the insurance would reimburse you for any losses, as well as profits that could have been made.

Separate Liability Insurance

Although a general liability insurance plan would cover many things, it is important to analyze all the risks that your business might take. Therefore, separate insurance should be considered for certain situations.

Workers’ Compensation Insurance

Most states require that a business have some sort of workers’ compensation insurance. This is of utmost importance when an employee is hurt and unable to work. Workers’ compensation will cover medical expenses and give the employee a certain amount of money for work missed while injured.

Professional Liability Insurance

Professional liability, or errors and omissions insurance, is often a separately added insurance plan that protects your company should a customer claim that he or she is at a loss financially due to the negligence or inadequacy of your business. For example, if a client hired your company to put in a wood floor, and the job was not done to expectations, it would leave the customer with a need to have it done again, and they would file a claim.

Umbrella Insurance

Umbrella insurance provides an additional expenditure of liability insurance when your other liability has reached its limit. For example, if a claim is filed against you, and the court, attorney and medical fees have used up all the coverage on your general liability plan, the umbrella insurance would pick up the rest of the cost. This is very important for small businesses that might have multiple claims filed against them in a given year.

Employment Practice Liability Insurance

As the number of claims from employee dissatisfaction rise, it is important to consider purchasing some sort of employment practice liability insurance, or EPLI. EPLI covers you for various complaints that an employee might have, such as sexual harassment issues, emotional suffering caused by the workplace, incursion on privacy, discrimination of any sort, violation of contract, and several other claims.

Affording Small-Business Insurance

Because premiums on any type of small-business insurance seem high, it would appear that purchasing liability insurance or another kind of insurance would be expensive, and sometimes not affordable to small businesses. However, the costs of not having liability insurance can be much higher. Simple out-of-pocket costs for filing a claim can put a business in debt and ultimately be its downfall. Disasters such as fire and theft could leave your business in ruins. To keep your business successful and avoid expensive litigation costs and expenses, look into purchasing small-business insurance through a recognized and well-developed insurance company.

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