If you’re self-employed, and you don’t have a business liability insurance policy in place, you may be playing with fire. And even if you do have a policy, it pays to shop and compare every few years. Not only are there changes in the industry and with the insurance companies themselves, but as your business grows and evolves, the liabilities you face may change. Taking a fresh look at your business liability insurance policy should be a part of your regular business strategy.
To help you in that quest, below are five of the best places to find business liability insurance. If you’re shopping for a policy, you should get quotes from at least two or three. That will not only help you to get the most affordable premium but also to better understand what a policy will and won’t cover. It’s the kind of information you need to be aware of before a claim arises.
Our Top Pick as The Best Business Liability Insurance Provider: State Farm
Were putting State Farm at the top of our list not just because of their business liability insurance, but also because the company is highly competitive in nearly every type of personal insurance. That includes auto, life, homeowners, renters, and condo insurance. It’s often an advantage to have several types of insurance coverage with the same provider. It creates an arrangement known as bundling that reduces the premiums on each individual type of coverage.
Since our target audience in this article is small business owners, it can be a major advantage to have your business liability insurance through the same company that also provides your various personal policies. In addition, when you work with State Farm, you’ll be working with a company agent. That person will not only help you choose the right insurance policy for your business but also handle subsequent service questions, as well as claims.
Our Runner Up Pick as the Next Best Business Liability Insurance Provider: Chubb
What we like about Chubb is that it operates primarily as a commercial insurance company. It can accommodate businesses of all sizes, but it specializes in those with international operations.
Since it’s become almost a business necessity for a small company to operate around the globe, the type of business liability insurance offered by Chubb is becoming increasingly important. If you have a substantial amount of revenue coming from foreign sources, operations located on foreign soil, or engage in an extensive amount of international travel by either you or your employees, Chubb is a preferred source for business liability coverage.
Thats not Chubbs only specialization either. As a company focused on commercial insurance, they provide virtually every type of business insurance your small business will need.
|Liability Insurance Prodvider||Best For|
|State Farm||Small business owners who want to bundle their business coverage with their personal policies|
|Chubb||Small businesses with significant international operations or travel|
|CNA||Business liability insurance that includes professional liability|
|AIG||Small businesses looking to become big businesses|
|Nationwide||Businesses looking for additional business benefits, particularly for employees|
Best Business Liability Insurance Providers
1. State Farm
State Farm is much better known for its personal insurance products, which is actually one of its major advantages with business liability insurance. One of the most user-friendly insurance companies in the industry, they provide an opportunity for small business owners to add business liability insurance to their different kinds of personal insurance policies. And with almost 20,000 agents throughout the U.S., they offer the kinds of hands-on service small business owners truly need.
In addition to the basic business owners policy (BOP) and general liability, they also offer surety bonds for individuals and policies to cover more than 100 different types of businesses. Some of the more unique businesses include contractors, personal services, specialty schools, and landlords.
If there is a downside to getting your business liability insurance through State Farm it’s the agent network. If the time comes that you need to change providers, you’ll need to leave the company. As State Farm agents, they don’t have the ability to switch you over to coverage with another carrier. However, that’s a minor issue if you’re satisfied with both the coverage and the premium.
Best for: Small business owners who want to bundle their business coverage with their personal policies. State Farm is obviously better known as a provider of personal insurance policies, particularly life, auto, and homeowners insurance. This may give a small business owner a greater comfort level in dealing with the same company for business liability insurance.
Chubb is one of the largest and best-known providers of business liability insurance. Because this is a specialization of the company, they can cover a wide number of businesses. And since their operations are global, they can also accommodate businesses with a large amount of foreign sourced revenue and operations, as well as international travel. Their Small Commercial Insurance (SCI) program can service small businesses from upstarts and up to $30 million in revenue.
Their policies include professional liability, coverage for medical expenses, and even political evacuation, as well as the workers' compensation for foreign employees. One of the more interesting provisions is their Cyber Enterprise Risk Management (ERM) program. Designed specifically for small businesses, it provides coverage for cyber incidents and exposures. They provide both loss mitigation services and incident response services.
Best for: Small businesses with significant international operations or travel. What makes Chubb unique isn’t that it provides business liability insurance for businesses with extensive overseas interests, but that it does so for small businesses. They offer a dedicated Foreign Package, that includes foreign voluntary Workers Compensation and contingent employers liability. It also provides emergency medical service as well as political evacuation and repatriation. With the rise of commerce on the Internet, as well as the growing prevalence of the global economy, an increasing number of small businesses need to operate on an international scale. If you do, Chubb is likely to be the best company for you.
CNA provides small business liability insurance through its dedicated program called CNA Connect. It provides business liability and property coverage, as well as professional liability for small business owners. What also makes CNA unique is that its business is commercial insurance. Since it doesn’t handle personal insurance policies, it focuses on providing business insurance at a very high level.
Like Chubb, CNA also provides protection for small businesses with substantial international operations. Other specialized coverages include fidelity and commercial crimes, and employment practices liability insurance. Industries served include construction, education, financial institutions, healthcare, manufacturing, professional services, real estate, retail, technology, wholesale distribution, and many others.
Best for: Business liability insurance that includes professional liability. CNA is a pure business insurance company, and one of its specializations is professional liability coverage. In fact, CNA claims to be the nations leading provider of professional liability insurance. It should be a must-stop on the way to finding that coverage if you are a professional providing personal services.
AIG works with businesses of all sizes, including local, one-person operations, up to multinational corporations. They also operate in over 80 countries around the world. That’s the kind of insurance company that can easily grow with your business.
In addition to business liability insurance, they also have director’s and officer’s liability coverage, employment practices liability, and fiduciary liability coverage. And like many other large commercial insurance companies, it can also provide related policies such as property and casualty, health insurance, surplus lines, and property insurance. Some of the more interesting policy provisions include environmental, fronting, and captive services, mergers and acquisitions, political risk insurance, and trade credit.
Best for: Small businesses looking to become big businesses. As one of the largest dedicated commercial insurance companies, with operations in virtually every major country in the world, AIG is an excellent choice as an insurance partner if your small business is on the fast track to becoming a large business. Offering virtually every type of commercial coverage, they can provide additional policy provisions as your business grows, along with your need for protection.
Nationwide is another large insurance company specializing in commercial and business coverage. However, like some of the other insurance companies on this list, they also provide a full range of personal insurance products, including life, auto, and homeowners coverage. It’s another good choice if you want to have both your personal and business insurance with the same carrier.
But Nationwide has a strong emphasis on business insurance. In addition to business liability insurance, they also provide coverage for commercial property and commercial vehicles under the business owner's policy. They even have policy provisions for loss of business income or equipment breakdown. And much like State Farm, Nationwide operates through a large network of company agents. That gives them not only the ability to create a business liability insurance policy for your company but also to be available to service your claims or other needs once the policy is in place.
Best for: Businesses looking for additional business benefits, particularly for employees. The company provides insurance for more than a half-million businesses across the U.S, and includes a Business Solutions Center. There you can take advantage of free resources and tools to help you start, run, and grow your business. Their policies can extend to cover workers' compensation, equipment breakdown, replacement of lost income, and even crime insurance. One very interesting business-related coverage is cyber liability. It helps cover the effects of a data breach or a computer hack on your business.
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What is Business Liability Insurance?
Business liability insurance is a general category of insurance offered to companies and businesses to protect both the organization and its principals from lawsuits and other claims. More generally, it covers the costs of the business entity or owner’s legal defense, as well as any additional financial liability.
Beyond financial and legal costs involved in a lawsuit, business liability insurance can also provide coverage for medical expenses, should either an employee or a customer be injured on company property. As well, it can extend to providing protection against injury or property damage caused by a company employee.
In the case of personal injury, business liability insurance can cover compensation for lost wages, non-monetary losses, and even punitive damages awarded by the courts.
For a business that rents the property it operates in, damage caused to the property by the business as a tenant can be covered. Damage can be by fire or any other type of covered loss. More specific provisions can protect against claims for false or misleading advertising or copywriting infringement.
In truth, a business liability insurance policy can be customized to protect against just about any liability you can imagine.
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What Business Liability Insurance Covers
Business liability insurance comes in basic several types:
General liability insurance. Often another name for business liability insurance, it specifically covers third-party bodily injuries, medical expenses, property damage, and advertising related events, among other potential hazards.
Professional liability insurance. More commonly known as errors and omissions, or simply E&O, it’s a type of liability insurance that protects those providing personal services, such as professional advice, or direct services. It protects against negligence claims by clients, or court-ordered damage awards. While it provides coverage in the event of general negligence claims, it usually will not provide for more serious errors or omissions, like gross negligence, or cases involving criminal prosecution.
Product liability insurance. This is a type of business liability insurance that relates specifically to businesses that manufacture, warehouse, distribute, or sell products. Specifically, it covers medical costs, property damage and legal fees resulting from claims by customers.
Umbrella insurance. This is a type of provision that covers claims that go beyond the limits of typical business liability insurance policies. For example, if your regular business liability insurance has a maximum liability benefit of $1 million, but you’re sued for $3 million, umbrella insurance will kick in. You can also cover special situations, such as slander, libel, or invasion of privacy claims. In fact, it’s excellent coverage to have in high-risk ventures, such as owning rental property or operating a business that’s unusually risky for employees and clients.
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Who Needs Business Liability Insurance?
Just about any business, regardless of how large or small, needs some level of business liability insurance. But one group, in particular, is small business owners. Lacking the protection afforded by a large corporation, small business owners can be held personally liable for events and circumstances related to their businesses. Having business liability insurance can provide a large measure of protection for the business owner’s personal assets.
But business liability insurance can also benefit members of partnerships or even owners of limited liability corporations, commonly known as LLCs. Even though there may be other owners involved in this type of business organization, each individual owner could face personal exposure in a lawsuit. This is especially true if the partnership or LLC involves the performance of personal services rendered by the owner(s).
There’s something of a misconception that organizing a small business as a C corporation completely protects the owner(s) from personal liability. And while this is generally true of large, publicly traded corporations, it’s less true of small, closely held corporations. In such companies, business liability insurance may also be well advised. Once again, this is especially true if the business involves providing personal services.
Pros and Cons of Business Liability Insurance
Any type of business holds the potential for legal claims arising out of unexpected events. Business liability insurance will protect against those claims.
Having business liability insurance in place will give the business owner(s) peace of mind, and the ability to better concentrate on running the operation.
A business owner can be protected against liabilities incurred as a result of actions by their employees.
The cost of business liability insurance is relatively low compared to the potential liabilities it covers.
Policies can be customized to fit your specific business, and the risks and hazards you’re likely to face.
Business liability insurance will only cover the insured against losses specifically listed in the policy. There’ll be no compensation for an event that’s not specifically included.
Either the business or the business owner may not be covered in cases involving gross negligence. The insurance company expects the insured to render services with reasonable care.
For certain businesses that operate in particularly hazardous environments or conditions, the cost of business liability insurance can be prohibitive.
If you have too many claims, your insurance carrier may drop your policy. You may also find it difficult to get coverage from another insurance company.
The cost of business liability insurance can be difficult for a new or very small business to absorb.
Given that there are different provisions within a business liability policy, is it more cost effective to get them all from the same insurance company or from several different companies?
In most cases, it will be more cost effective to have all policy provisions provided through the same insurance company. This is very similar to bundling personal insurance, such as homeowners and auto insurance, or even communication-related services, like Internet and cell phones.
What if my business faces specific hazards not covered in a general business liability insurance?
The best course of action is to discuss the specific hazard with your insurance agent. They may have a specific policy or provision available to cover that event. If they don’t and the risk is significant, you may need to consider working with a different insurance company.
When is umbrella insurance a good provision to have?
The primary purpose of any type of insurance is to protect the personal assets of the individual insured. If you have a significant amount of personal assets – well in excess of the maximum benefit in your business liability insurance policy – you should seriously consider adding an umbrella provision. While the business liability policy may offer coverage sufficient for the scope of your business, it may not be enough to protect your personal assets. In a serious lawsuit situation, a plaintiff may go after any and all assets within your control.
Is there a ballpark range on what business liability insurance premiums will be on an annual basis?
Unfortunately, no. Like any other type of insurance coverage, the amount of the premium will be determined by a number of factors specific to your circumstances. For example, with auto insurance, the premium will be determined by your age, driving record, and geographic location, among other factors. But since businesses have so many moving parts and potential points of liability, the variables are even greater. The premium will be based on factors such as the specific type of business you’re in, your geographic location, the volume of business you do, the number of employees you have, laws in your state, and many other factors.
If you own a business of just about any type, having a good business liability insurance policy in place is practically a requirement. If you’re not sure what to do, invest some time discussing the prospect of a policy with three or four different insurance companies. Premium rates can vary substantially from one company to another, and you may also find that one company doesn’t have specific protection that your business requires.
One of the built-in difficulties with business liability insurance is that it is more complicated than other types of coverage. Since your business is unique and has many variables, it won’t be possible to generalize the type of coverage you need. But if you know your business, and you speak with knowledgeable insurance representatives, you should be able to piece together a policy that will protect you and your business at an affordable premium.