Small business owners are always looking for the most economical way to run their companies. After all, profitability depends on maximizing revenue and minimizing operating expenses; pursuing one without the other is counterproductive. So, entrepreneurs are always seeking out ways they can cut costs without cutting the quality of work they’re doing.
It might be tempting for SMBs to cut any expense that seems optional — like a liability insurance policy. But you’re taking a huge gamble by forgoing this coverage. Sure, you’ll save some money each month. But if you’re ever found liable for accidental harm to a third party, those savings will pale in comparison to the thousands you could owe in damages and legal fees.
Here’s why savvy small businesses know that comprehensive General Liability insurance is well worth the price.
Liability Claims Can Be Way More Expensive Than Premiums
The exact cost of liability insurance for a small business will depend on factors like the worth of the policy and the nature of the job. But typically, the cost of monthly or annual premiums — even over the course of years — add up to far less than the cost of a liability claim.
According to Insurance Journal, here are the average price tags for three of the costliest claim types covered under General Liability insurance:
- Reputational harm: $50,000
- Customer injury or damage: $30,000
- Customer slip and fall: $20,000
And if a lawsuit is involved, SMBs may be looking at costs upwards of $75,000 without the right insurance to mitigate these damages.
General Liability Covers Bodily Harm, Property Damage, and Personal Injury
As a savvy SMB owner, you want to know what kind of coverage you’re getting when you pay your premiums. General Liability business insurance provides multi-faceted coverage, protecting against liability stemming from bodily injury, property damage, and personal injury.
Businesses are liable for bodily harm or illness they cause to others, even inadvertently. Let’s say you run a janitorial service and are waxing the floors of a commercial building, but forget to put out a sign warning pedestrians about the slippery conditions. Someone falls, breaking their arm. Without insurance, you’d be responsible for paying the victim’s medical bills, lost income, and physical therapy resulting from the accident.
Companies are also liable for property damage they cause to others. For example, say a painting company is hired to repaint the interior of a new home. One of the painters accidentally leaves the sink on for hours after soaking their brushes, causing flooding in the kitchen and basement below. The homeowner sues the company for significant damages to their home.
Finally, personal injury coverage protects businesses against the financial fallout resulting from things like false imprisonment, libel, slander, invasion of privacy, and copyright infringement. In the case an individual or business sues you, alleging damage for one of these non-bodily injuries, a General Liability policy will cover legal fees and rulings against you.
Some Customers Will Only Hire You with Proof of Insurance
The final reason why many SMBs depend on General Liability insurance is because some clients will not hire uninsured businesses to complete services for them. Why? Because doing so would require them to take on significant risk. Allowing a contractor who lacks insurance onto your property means they have no policy to cover accidental damage or harm they cause.
People also interpret carrying adequate insurance as a sign of professionalism. Whether you run a catering company, landscaping operation, or dog walking business, you’ve likely had a potential customer inquire about your insurance status before.
General Liability insurance isn’t just for large corporations — it’s an important protection for SMBs, too. With more flexible policy options and prices available today, there’s no excuse not to have a policy in place.