5 Questions on Business Liability INsurance
Get the Right Liability Coverage for Your Business
Buying insurance to protect your business against liability is a step in the right direction. Once you make the decision, however, the big question becomes: How much coverage do I need?
Understanding the goal of having general liability insurance can help. Liability insurance protects you and your financial assets if you are found responsible for injuries or damage to other people’s property. It also pays to defend you in a lawsuit.
For example, if a customer falls and suffers injuries in a restaurant, this person could sue the restaurant owner for negligence. If a judge finds the owner liable for the injury, that is when your liability coverage will kick in.
The cost of general liability insurance can range from a few hundred dollars to several thousand dollars depending on the size of the business and its associated risks. To understand how much business liability insurance you need, ask yourself these six questions.
1. What Assets Do I Need to Protect?
The business is an asset as well. For many people, it’s how they feed their family, and general liability coverage protects that livelihood.
2. How Much Liability Coverage Do I Need?
Another way to think about this question is: how much of a loss would it take to put your business out of business?
There is no answer to the exact amount of liability coverage you should have, but a general rule is to carry enough insurance to prevent your business from closing for good.
3. What Does Washington State Require?
4. Can Clients Require Liability Insurance?
5. How About Umbrella Insurance?
An umbrella policy is also a less expensive way to get additional liability coverage. It is important to remember that it only can be used once the underlying limit of the general liability coverage is exhausted.
For example, in the Bellevue bakery scenario, instead of purchasing $5 million in general liability insurance, the owner could select $2 million in general liability insurance and an additional $3 million umbrella policy. Then, if the bakery is found liable for $3 million, the general liability insurance would cover $2 million of that cost and the final $1 million would come from the umbrella policy.
An umbrella policy should be considered if you feel your liability needs exceed what you have as an underlying limit.