You need to have the appropriate liability insurance to safeguard your business, just as you have health insurance in case you fall sick.
Insurance is probably the one purchase you make in the hopes that you’ll never need it. All insurance types, including business insurance, are subject to this. It’s also true that there are many misconceptions concerning the necessity of business insurance; thus, let’s clarify some of them straight now.
Here are some widespread myths regarding business insurance, along with the truth.
#1: The cost of business insurance is high
You need to be extremely careful with your money while beginning a business. Cutting corners on the wrong things, though, can be a costly error. Think about professional liability insurance, sometimes known as E&O or errors and omissions. This coverage guards you in the event that you are held liable for something you did or for something you should have done but didn’t. If your line of work entails giving advise, you must have it.
A professional liability insurance policy for a small consulting firm can cost $500 or $1,000 annually. (Your cost is influenced by a number of variables, such as your location, the size of your business, the services you offer, and others.) You’ll need to retain legal representation if you’re sued. The typical hourly rate for an attorney is $250, while some charge far more. So, if you were to “save” the annual cost for a professional liability insurance coverage, you could hire a lawyer for two to four hours. On the other hand, the policy might pay for all of your legal expenses, a settlement or judgement, and even any lost profits from your business as a result of having to give a testimony or appear in court.
#2: Only big firms are sued
Even in our litigious culture, many people are aware that going after a big business in court is frequently a bad idea. They have the financial wherewithal to wait out a plaintiff, tying up the matter in court as their in-house attorney refuses to move. However, suing a tiny business is a different situation.
A third to a half (36 to 53 percent) of all small firms, according to the Small Business Administration (SBA), are thought to be involved in litigation every year. Therefore, it is highly possible that you will have faced legal action by the time you have been in operation for three years.
#3: My home insurance covers my home-based business
A provision in your homeowners insurance may forbid using your house for commercial purposes. Your house insurance may not cover you if you keep merchandise or have clients over there. Naturally, it won’t protect you from legal action either.
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#4: I don’t need insurance because I don’t have a storefront.
You require general liability insurance if you interact directly with clients. This shields you from claims that you caused someone else’s property damage or bodily injury (e.g., a client or vendor, not you or an employee). Additionally, it safeguards you from accusations of defamation, libel, and advertising harm. In other words, it’s far more than just “slip-and-fall” insurance, though you are also protected for that.
#5: I would simply be paying for a lot of coverage I don’t require
There is no need for business insurance to be a one-size-fits-all product. The type(s) of coverage you require, the scope of the coverage, and your deductible are all options. For instance, if you operate as a sole proprietor, you might not require workers compensation insurance. If you don’t offer advice, you might not need professional liability insurance.
#6: I employ a binding contract. I could never lose in court
Every organisation should employ contracts because they are a crucial component of risk management. A strong contract may shield you from paying a judgement, but it won’t shield you from being sued. A lawsuit is also expensive, even if it has no validity. You must pay for a defence attorney, and you might need to miss work to attend depositions or a trial. Even if the lawsuit is unfounded, professional liability insurance can pay for these expenses.
You have both health and auto insurance in case you become sick or have an accident. You are aware that if something happened, it would be expensive. The same is valid for your company. The company you’ve worked so hard to develop will be safeguarded by the appropriate liability insurance.
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