What if I said there’s a good chance your business faces a lawsuit? Many small businesses face at least one form of litigation annually.
With that, general liability insurance can prevent headaches in the form of lawsuits.
What does general liability insurance cover? In addition to lawsuit safeguards, it also covers employee mishaps, cyber breaches, slander, among other protections.
Your business will also become more credible in the eyes of clients and consumers. This article will explore the key reasons why your business should obtain liability insurance. Let’s explore.
5. An Air of Credibility
Business insurance demonstrates your willingness to take responsibility. This type of insurance will be useful if an accident occurs in the workplace, or if a client suffers an injury on your company property. Most importantly, it will give your clientele peace of mind.
Regardless of your trade, unintended hazards may be around the corner. Unknown variables make clients nervous. Take note of the following incidents:
- A slip-and-fall accident: The cost of a fall accident hovers around $20,000. A customer who suffers an injury on your property can sue you for liability.
- Reputational Lawsuits: An individual or business can sue your company if the plaintiffs claim your business damaged his or her reputation. Lawsuits of this magnitude incur a cost of $50,000.
These factors may make potential business partners reluctant to do business with you. However, liability insurance can put them at ease.
- Example: You’re applying for a business loan at a loan company. However, the lender sees your business as a risky venture. The addition of business insurance on your application, however, can allay their fears.
As a result, you can increase your chances of loan approval. Plus, insurance conveys you’re serious about your business.
4. Establish Your Company
Insurance for businesses also proves your company is a long-term operation. According to labor statistics, 20% of small businesses fail in the first year. Moreover, 50% of small businesses fail in five years.
These statistics can make clients and partners hesitant to deal with small businesses. This is especially true if your industry comes with inherent risks and uncertainties.
You can still attract clients and investors with business insurance because it evokes stability. If you own a startup, for example, general insurance can make investors or vendors take you seriously.
Additionally, your future business partners will trust you more. They see your willingness to protect what you own. A lack of insurance can make them assume your operations may falter if a disaster occurs.
Further, business insurance also reveals your intention to protect the interests and assets of your clients.
3. Obtain More Clients
Your company’s trustworthiness will travel by word-of-mouth. Most consumers believe word-of-mouth is credible, especially from friends and family members.
You can also increase leads and contacts by showing your business is stable and credible. If you’re contractor, you can market your company as bonded and insured. This is a great marketing tool that attracts more leads.
Clients and prospects will assume your intent to avoid the hassles of filing an insurance claim. They’ll also surmise that you’ll have tougher safety standards to prevent insurance claims.
Insurance won’t give your company credibility on its own, but it’s one more piece that gives your business higher standing.
With that, you don’t have to claim you’re insured directly. Instead, you can hang a plaque in a common area showcasing your insurance status. Clients and visitors will take notice and spread the word about your legitimacy.
2. Digital Protections
Insurance for a business doesn’t only cover physical assets and employees. It also protects digital information.
Many policies cover sensitive information that’s vulnerable to data breaches. If you cannot obtain a cyber coverage provision, you can obtain cyber liability coverage.
Studies reveal 29% of businesses undergoing data compromises lose revenue. Also, up to 38% of companies lose 20% or more of revenues. Besides lost revenue, consider other liabilities that can occur:
- The additional costs needed to invest in upgrades
- The loss of clients and consumers
Your reputation will suffer immeasurably if hackers obtain your client data. Your clientele could walk away forever, or your businesses could face a liability lawsuit. This is especially true if your business harbors credit card information.
Cyber insurance generally falls under two categories:
- First-Party Coverage: This provision covers lost or damaged data from hacking and viruses. It will also cover any loss of income you suffer, including additional expenses needed to mend the fallout.
- Third-Party Coverage: This provision covers negligence from viral attacks, unauthorized access, or data breaches.
You should also consider insurance if you’re holding sensitive data in the form of trade secrets or inventions. If your company holds a trade secret, for example, a hacker could breach your system and offer your secrets to other businesses.
After, companies could steal your business model and outcompete you. Overall, there is little you can do about trade leaks. Even though insurance may not cover all the damage, it provides a compensation plan that allows you to recover faster.
1. Covers Employee Liabilities
Employees are the face of your company, and their decisions reflect on your company. Business liability coverage also covers you from employee liabilities on several fronts. First, it will safeguard your company against reckless actions caused by a worker.
- Example: A consumer can sue your business if an employee rushes down an isle and bumps into a customer, causing injury.
Moreover, insurance will protect your entity if an employee causes property damage.
- Example: You own a plumbing business. One of your plumbers knocks over an expensive vase while working in a client’s home. Your business is liable.
Also, consider a separate personal liability policy to give extra protection to yourself.
Will General Liability Insurance Cover All Aspects of My Business?
General liability insurance doesn’t always extend to certain cases. If an employee suffers an injury on the job, for example, you’ll need a separate worker’s comp insurance plan.
However, you can usually get a worker’s comp insurance plan and a general liability plan under one insurance company. Most importantly, business insurance will solidify your reputation in the business community.
Interested in reading more about insurance coverage for businesses? Click here to learn more about the benefits of business liability insurance.