February 17, 2020 Last updated March 11th, 2020 1,378 Reads share

How to Protect Your Business from Financial Loss

Image Credit: DepositPhotos

If you are self-employed or run a small business, you are bound to encounter risks in the daily running of your business. Unless you take proactive steps to limit the effects of these risks, they could very well jeopardize the success of your business, if not result in complete business failure.

Investing in general liability insurance is one of the ways you can do this. 

This type of insurance is vital for businesses that interact with customers and the general public and can help protect against financial loss should something go wrong during this encounter.

For example:

  • A customer can be injured in a slip and fall in your business premises
  • A member of the public can get injured during a public event organized by your business
  • An injury can occur within your premises or even outside but which is somehow tied to your company, such as when your company sign falls on a passer-by. 

In any of these or related scenarios, general liability insurance may be the best protection for your business against potential fallouts.

What Is General Liability Insurance?

Small business owners, sole proprietors, and even partnerships put their personal finances at risk in the event that the business is involved in a lawsuit. In fact, in some cases, even the owner of a limited liability company is exposed to personal risk when the company is in legal trouble. What general liability insurance does is respond when your business is sued by a third party. This insurance provides greater financial protection than anything offered by any other legal system. 

Why You Need General Liability Insurance

As a self-employed or small business owner, you stand the risk of being held liable if a member of the public (your customer, client, or even a passer-by) gets hurt either while at your place of business or as a result of something you or your business did. This also applies to damage to property. Even if an employee in your organization is responsible for the accident, your business, and your extension yourself could be held liable and made to pay huge sums of money in damages.

But when you take out general liability insurance, even if any of these things happen, your insurance protects you from incurring financial loss even if the case ends up in court. 

You should seriously consider general liability insurance if any of the following applies to your business:

  • If you interact with the public face to face, such as visiting a client’s place of work or receiving such visits at your place of work. 
  • If for one reason or another, you have access to someone else’s property. For example, if you run a home cleaning service and someone in your employ damages a client’s valuable piece of property. 
  • If you use any form of advertising in your business. For example, you may accidentally use someone else’s advertising materials that have been copyrighted or trademarked.
  • If you use locations other than your premises for business-related activities, such as when your job requires that you work on a job site, as is the case with architects. 
  • When you enter into any contract that requires general liability insurance. For example, as a construction contractor, you may not be able to clinch profitable contracts unless your business is protected by this cover.

How Much Does General Liability Insurance Cost?

According to research by underwriters at Talisman Insurance, the average cost for general liability insurance annually is USD$800. However, there are a number of factors that affect how much you will pay for general liability insurance. When you want to buy this cover, the insurance company will factor in the necessary determinants to come up with a figure for your general liability insurance. These factors are:

  • The size of your business premises
  • The condition of said premises and the property in the premises
  • Where your business is located
  • Your industry and the type of business you run
  • The age of your business
  • Number of workers in your employ
  • Your business claims history

There are also a few other factors that may or may not influence the cost of general liability insurance. This includes the coverage limits of your policy. For example, the higher your coverage limit, the more you will be required to pay for general liability insurance. The size of your deductible will also play a role in how much you end up paying for insurance premiums. If you have a higher deductible, you will pay lower premiums. An insurance deductible is what you are expected to come up with in terms of cash before the insurance company will chip in the rest. 

Thankfully, there are a few things you can do to cut down on how much you pay for general liability insurance. Some of the options to consider include:

Bundling Your Insurance Policies

Instead of buying separate covers for your business, you can buy what is called a Business Owner’s Policy (BOP) which is a bundle of property liability and common liability covers. The BOP bundle is cheaper and going this route will save you a few bucks.

Reduce Your Insurance Risks

Insurance companies tend to charge higher premiums if they see your business as a high-risk business, but when you are able to successfully manage and reduce these vulnerable points, it can earn you a discount from the insurers. 

To reduce your risk, you can:

  • Invest in a security system for your business
  • Develop and implement a training program for your employees
  • Find ways to minimize workplace hazards
  • Install a fire alarm and sprinkler system

Increase Your Deductible

As already pointed out, the higher your deductible, the lesser premiums you will pay. While this is inherently a risky move, it can save you a lot of money on insurance premiums. However, you should be very sure that you can afford to cover your deductible in the event of an insurance claim.

Wrapping up

Entrepreneurship is both a thrilling and challenging experience. You get to go home with huge wins, but when the losses happen, you also tend to take the lion’s share. But you can reduce these losses significantly by making sure your business has the right kind of coverage. 

With general liability insurance, at least you know you are covered from third party liabilities. 

insurance policy – DepositPhotos

James Cummings

James Cummings

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