Finding the best business liability insurance coverage for your small business should, in theory, be easy. There are plenty of companies out there offering different insurance policies. Among those options, one or more will fit your needs.
The challenge is identifying which providers they are.
Below is all the information you need to know about business liability insurance.
TL;DR
- The best business liability insurance protects businesses from liability claims related to third-party injury or property damage.
- There are a few types of business liability insurance. Depending on the type of business, you may need more than one.
- This post covers business liability insurance: what it is, how to tell which you need, how to purchase it, and which providers are best for small businesses.
What is Business Liability Insurance?
Business liability insurance protects businesses from claims related to third-party injury or property damage resulting from your operations, products, or services. It covers legal costs and payouts for which a business is liable. This includes medical expenses, court costs, and settlements or judgments against the business.
Why is Business Liability Insurance Important?
Accidents and mistakes can happen no matter the size or type of business you’re running. Without an adequate policy in place to provide financial protection, these events can quickly put a business in serious financial difficulty. Business liability insurance is the counterbalance to help you cover the costs of legal defense and settlements related to covered losses.
Types of Business Insurance Policies
| Type of Insurance | Definition |
| General liability insurance | Protects businesses from financial losses due to third-party claims of bodily injury, property damage, or personal injury. This type of insurance covers legal costs and damages up to the policy limits. |
| Product liability insurance | Covers businesses that manufacture, distribute, or sell products against claims of injury or damage caused by their products. This type of insurance covers legal defense costs, settlements, and judgments up to the policy limits. |
| Professional liability insurance | Also known as errors and omissions (E&O) insurance, this policy covers professionals, such as doctors, lawyers, and accountants, against claims of negligence or errors in their professional services. This type of insurance covers legal defense costs, settlements, and judgments up to the policy limits. |
| Employment practices liability insurance | Protects businesses from financial losses due to claims of employment-related issues, such as discrimination, harassment, wrongful termination, and retaliation. This type of insurance covers legal defense costs, settlements, and judgments up to the policy limits. |
| Cyber liability insurance | Covers businesses against losses caused by cyber-attacks, data breaches, and other cyber threats. This type of insurance covers expenses related to data recovery, business interruption, legal fees, and liability claims. |
| Business interruption insurance | Covers businesses against financial losses due to interruptions in their operations, such as natural disasters, fires, and other unforeseen events. This type of insurance covers lost profits, fixed expenses, and other costs associated with the interruption. |
Business liability insurance comes in a variety of forms. Some small businesses may only need one of these types of coverage, while others might want to consider a combination of policies.
General liability insurance
General liability insurance covers third-party suits related to bodily injury, property damage, advertising injuries (libel and slander), and personal injury that result from business operations. Your general liability policy will also cover costs related to defending a lawsuit up to the coverage limit.
An example where you may need general liability coverage is when a customer gets injured on your premises.
Product liability insurance
Product liability insurance covers claims about defects or injuries caused by your products. It also covers any necessary legal costs and payouts.
For example, if a product you sold were defective and caused someone harm, this type of insurance would cover the costs of any resulting legal action.
Professional liability insurance
Also called errors and omissions insurance (E&O), professional liability insurance covers claims related to negligence or failure to perform services that cause financial harm to a third party. This type of business liability insurance is common among businesses such as consultants, lawyers, and accountants.
Imagine you’re a financial advisor who makes a mistake in your client’s portfolio, resulting in a significant loss. Professional liability insurance would cover any legal costs or settlements related to the incident.
Employment practices liability insurance
This type of business liability insurance covers claims brought against companies by current, former, and potential employees (or job applicants). It covers expenses related to wrongful termination, discrimination, sexual harassment, wage and hour disputes, and more.
Examples here may include a former employee suing you for discrimination in the workplace. This type of insurance will cover any legal costs and/or settlements related to that claim.
Cyber liability insurance
Cyber liability insurance covers a business’s legal and financial liabilities related to a data breach. Say hackers got access to your company’s confidential customer information. Cyber liability insurance could help policyholders to cover the costs of notifying customers, credit monitoring services, identity theft restoration, etc.
In 2022, cyber risks became the greatest business concern worldwide. Insurance is the best safeguard if you fall victim to a hack or breach.
Business interruption insurance policies
Business interruption insurance, or business income insurance, covers financial losses due to a covered event. This can include fire, severe weather, or other disasters that might cause a business to close temporarily.
This type of insurance will cover the costs associated with getting back up and running after an event, including lost income and extra expenses incurred while closed.
Remember that your business may need a combination of these coverage types. You will need general and product liability insurance if you sell products and operate a brick-and-mortar store. If you store customer data or operate online, you may want to add cyber liability insurance also.
Factors to Consider When Choosing Business Liability Insurance Coverage
All business spending must be carefully weighed to ensure you get the most from your investments.
You want to examine the following:
Size and type of business
Start by understanding your business. Think of the number of employees and the size of your business. What type of service, products, or offerings do you deliver?
Coverage limit
Consider the cost of the policy against what it will cover. Assess your risks and liabilities, and ensure you have an appropriate amount of coverage for a worst-case scenario.
Premium business insurance cost
You will have to pay an annual premium for the coverage. Make sure you know how much it is and factor this into your budgeting for any given year. You should also consider discounts, such as bundling policies, setting up automatic payments, or increasing deductibles.
Deductibles
Review the type of deductible (the amount you’ll pay out-of-pocket before the policy kicks in) in the policy. This can differ by coverage type and should be considered when deciding on a plan.
Carrier’s reputation and financial strength
Look into the provider’s reputation and financial strength ratings. Financial strength shows how well an insurance company is able to payout claims, while other reviews or third-party ratings can provide insight into customer service and coverage quality. Look for providers with an A rating from AM Best.
Exclusions/conditions
Be sure to review any policy exclusions or conditions before purchasing it. Common exclusions are typically related to professional services, employee dishonesty, and intentional harm.
Individual business needs
In addition to your size and type of business, look at other unique factors that may be included in your operation. For example, if you handle technology-related or sensitive customer data, you might want to consider cyber liability insurance. If you’re engaged in online activity, look into media liability coverage.
Top 5 Small Business Insurance Providers
To save you from scouring the internet, we’ve found the top five business liability insurance providers for small businesses in the US.
Hiscox
Hiscox is a leading specialist insurer providing business insurance, including property coverage, casualty, and professional indemnity insurance. The company was founded in 1901 in the UK and has since expanded globally, with offices in 14 countries across Europe, the US, and Asia. In the US, Hiscox offers insurance to small businesses in all 50 states.
The company offers a range of insurance products tailored to the needs of small businesses, including liability insurance, professional indemnity insurance, and cyber insurance.
Hiscox is known for its expertise in underwriting complex risks, making them a great option for small businesses with unique insurance needs. They pride themselves on their customer support. This includes an online quote system where small business owners can identify and purchase the coverage they need quickly and efficiently.
The Hartford
The Hartford is a leading insurance company based in the United States, with a history dating back to 1810. The company offers a range of products tailored to small businesses, including liability insurance, commercial auto insurance, and workers’ compensation insurance. They understand the unique risks and challenges that small businesses face and have designed their insurance options to help small business owners protect their assets and employees.
Their customizable coverage options make it easy for small business owners to get the coverage they need without paying for unnecessary extras. They also have a strong reputation for customer service, which can be especially important for small businesses with limited resources to manage their insurance needs.
In addition to insurance, The Hartford also offers a range of financial services products, including annuities and mutual funds, which may be of interest to small business owners looking to manage their finances and plan for the future.
Nationwide
Nationwide is a large insurance and financial services company based in the United States, offering a variety of insurance products for small businesses, including liability insurance, business property insurance, and workers’ comp.
Their customizable policies allow small business owners to tailor their coverage to their specific needs, ensuring they are only paying for what they need. Nationwide is also committed to providing excellent customer service, which can be especially important for small businesses looking for a partner to help them manage their insurance needs.
Nationwide also offers banking and lending products, retirement and investment solutions, and wealth management services, which may be of interest to small businesses and homeowners looking to manage their finances and plan for the future.
Chubb
Chubb is a global insurance company founded in 1828 that offers a range of insurance products tailored to small businesses, including liability insurance, property insurance, and cyber insurance. They have a strong reputation for underwriting complex risks and have designed their coverage options to help small business owners protect their assets and employees.
Their customizable coverage options make it easy for small business owners to get the coverage they need without paying for unnecessary extras. Like the others, Chubb is also known for their strong customer service solutions, including their online policy management platform, quick claims handling, risk management services, and phone, email, and online customer service.
Chubb also offers risk management services, including loss control and claims management, which can help small business owners identify and mitigate potential risks.
Travelers Insurance
Travelers Insurance was founded in 1864, making it one of the oldest insurance companies in the United States. The company was originally founded to provide travel insurance coverage as its core service. But over time, it has grown into a leading insurance company offering a range of insurance products and services to businesses and individuals worldwide.
For small businesses, they offer a range of coverage options, including liability insurance, commercial property insurance, and workers’ compensation insurance. They have designed their coverage options to be flexible and affordable, with customizable options for coverage, multiple policies, deductibles, and payments.
Their online platform makes it easy for small business owners to manage their policies, view their certificate of insurance, file claims, and access risk management resources.
Other Notable Business Owner’s Policy (BOP) Providers
Next Insurance
Next Insurance is a digital insurance provider that offers simple and affordable business insurance solutions for small businesses in various industries.
Thimble
Thimble is an on-demand insurance provider that offers short-term liability insurance coverage for small businesses and independent workers.
State Farm
State Farm is a leading insurance company that offers a range of insurance products, including auto, home, life, and business insurance, to customers across the United States.
Best Commercial Auto Insurance Provider
If you have a company car, you may want to consider Progressive. Progressive is known for its innovative approach to commercial auto insurance, and the company was one of the first insurers to offer a usage-based insurance program.
How to Purchase Business Insurance Coverage
As such a critical business service, purchasing business insurance coverage can be done in a few ways, ranging from full consultation to DIY.
Work with a broker or agent
Working with a business insurance broker or insurance agent can be beneficial as they have the experience and knowledge of all the different policies and options available.
Direct purchase from the insurance company
If you’ve found your insurance company and are ready to sign up, you can easily go directly to the carrier. Alternatively, you could go direct to a few, obtain insurance quotes, compare plans, and ask them about their solutions for your particular business needs.
Online insurance marketplaces
To save money and time, online insurance marketplaces allow you to compare business liability insurance policies from multiple carriers simultaneously.
Which Is Your Best Small Business Insurance Company?
Which is best always comes down to your unique business needs. Size, industry, and the type of business you run will all alter which insurance companies come out as the top performing. What’s most important is that you do get covered.
Business liability insurance is an essential protective measure for all small business owners. A lawsuit or other legal action could spell financial ruin without proper coverage. Small businesses, in particular, are vulnerable to these types of claims. Without abundant resources and capital, even small hits can have huge repercussions.
FAQs About Business Liability Insurance
Q: What is covered by the best business liability insurance?
Business liability insurance covers various types of financial losses that may arise from claims made against your business by a third party. This includes bodily injury or property damage caused by your business operations, products, or services.
For instance, if a customer slips and falls on your premises and sues you for medical expenses, the insurance policy may cover the costs associated with the lawsuit. Similarly, if you are a contractor and accidentally damage a customer’s property during a project, the policy may cover the damages and associated legal fees. Business liability insurance can also cover losses caused by product defects, cyber-attacks, and business interruptions. The insurance policy typically covers legal defense costs, settlements, and judgments up to the policy limits.
Q: Is business liability insurance required by law?
In most cases, business liability insurance is not required by law at the federal level. However, some states and industries may have specific legal requirements for certain types of liability insurance.
Q: How much does business liability insurance cost?
Your insurance costs will depend on factors like the type of coverage you need, the size of your business, and the level of risk associated with your operations. On average, small businesses can expect to pay anywhere from a few hundred dollars to several thousand dollars annually for liability insurance. The cost may also depend on the industry you are in, with some industries having higher risks than others.
Q: How do I know if I need business liability insurance?
Generally speaking, if you operate a business that has the potential to cause harm or damage to others, or if you have valuable assets that could be at risk in a lawsuit, you should strongly consider getting liability insurance.
Some factors to consider when deciding whether or not to get business liability insurance are:
- The types of products or services you offer
- The number of employees you have
- The likelihood of accidents or injuries occurring on your premises
Q: Can I purchase business liability insurance if my business is high risk?
Yes, you can still purchase business liability insurance if your business is considered high risk. Just remember that the cost of insurance will be higher than for businesses with lower risk levels.
Insurance companies typically assess the level of risk associated with your business based on factors such as the type of products or services you offer, the number of employees you have, and the history of accidents or liability claims.
