Keeping it safe: Why liability insurance is a smart idea for your small business
Filed under: Entrepreneurship, Insurance
I know many people who have opened small businesses, offering consulting services of all kinds: computers, human resources, advertising, business coaching, accounting, legal services, web design, and more. No matter what type of "consulting" you do, you need liability insurance.You're sitting there saying, "What? Me? Liability? For what???" The sad truth is that our society has gotten to a point where people are suing anyone and everyone, even if it's not your fault. Do you want to risk a lawsuit against your small business without the benefit of insurance? Do you think you could really cover all of the legal fees? Are you in a position to pay a settlement to a plaintiff and still keep your doors open and food on your table?
The fact is that we, as consultants, can and do make mistakes in our work. Liability insurance is a necessary evil to protect ourselves and our families in the event that we make a mistake (or are accused of a mistake). For many types of consultants, liability insurance isn't even all that expensive, costing from $1,000 to $2,500 for a year of coverage. Of course, the premium will depend upon the type of work you're doing and the bells and whistles you want on your policy. But the peace of mind offered by such policies is definitely worth the price tag, and a "must have" for all small businesses.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Reader Comments (Page 1 of 1)
2-13-2008 @ 7:14AM
al coholic said...
Liability insurance is certainly necessary but don't think it will protect you across the board. For example, I own a roofing company and carry a very expensive liability policy. We had a water damage claim while rofing a bank when a storm overpowered our temporary patch between the existing roof and the area we were reroofing. Believe it or not there was an exemption in our policy whereby the company claimed it didn't cover us during installations, only when the roof was completed. What the hell did they think I bought the policy for?
Anyway, the moral of the story is, don't assume you have coverage for all mishaps. There is a lot of fine print in your policy, and, surprise surprise, most of it is written for the insurance company's benefit.
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2-28-2008 @ 11:10PM
Kathleen said...
Thanks al coholic for the story.
I had the same experience. It is clear that buying insurance today can be, not only a waste but, couterproductive.
If a small professional business is sued for an alleged mistake, it must now fight the insurance company it has been paying before addressing the complainant. The stress is two-fold. Trusted Name Insurance companies can become the first adversary, if called upon for support. Citing the fine print, they are eager and well staffed to resist any and all claims for coverage.
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3-02-2008 @ 8:41PM
Joel said...
Read you policy when you purchase it, so you will undertand what you are buying. You get what you pay for. The cheapest policy will usually give you the least amount of coverage. Always buy from a local independent agent...
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4-08-2008 @ 10:20AM
David said...
Liability insurance is a must! While it is true insurance companies often attempt to exclude covered losses. They still owe a duty to defend you (hire a lawyer for you if sued) and usually are circumspect about denying coverage since public policy favors the insured. I know this well since I have been a lawyer nearly 20 years and the lack of insurance can be devastating.
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