General liability insurance is an important aspect of running a business. Having this policy protects you from many of the common risks associated with business ownership, such as personal injury and property damage. But if you don't take the time to carefully review and learn about your specific coverage terms, you may end up learning the hard way that it's called "general" liability for a reason.
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Insurance experts discussed some costly mistakes that small business owners frequently make concerning their general liability insurance, and what you can do to make sure your business is fully protected.
Thinking you don't need insurance
One of the worst assumptions a business owner can make is that he or she doesn't need any insurance coverage. While you may not have a lot of room in your budget, the price you'll pay for a lawsuit if something goes wrong is far greater than any monthly premium for basic liability insurance.[Small Business Insurance: Where to Start]
"By not properly assessing their risks, small business owners may conclude that they do not need insurance," said Stephen Leveroni, executive vice president and general business practice leader at insurance and financial services firm The ABD Team. "Those that start in their homes may have the false assumption that their homeowners' insurance policy provides coverage [for their business]."
Leveroni also pointed out that structuring your company as a corporation, LLP or LLC does not mean you don't need a general liability policy.
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"While [the structures of] these entities do help, they are not substitutes for liability insurance," he told Business News Daily.
Assuming your policy covers everything
While general liability coverage does address the most common business risks, it's not necessarily a catch-all for every possible scenario. Small business owners often assume that their policy automatically covers them if any issues arise, but those who have read the fine print — which many fail to do — know that this isn't the case.
"Insurance contracts are agreed-upon transfers of risk for a fee," said John Buckley, a partner with Ungaretti and Harris law firm. "Insurers, however, are careful about what risks they accept and what risks they exclude. Unprofitable, unpredictable and unmanageable risks are excluded by the insurers over time to reduce their risk and manage their portfolio more profitably."
Buckley advised speaking with a professional broker to help assess your business's specific risks and shape your general liability policy to best fit your needs.
Forgetting about cybersecurity
In an age where nearly every business has a Web presence, cybersecurity is an issue that will most likely affect you, regardless of your industry. Tech startups are usually hyper-aware of this risk, but non-tech businesses tend to forget that they're not outside the reach of hackers.
"Small businesses are of greatest risk for a breach due to their often limited budget, lack of security and thin staff," saidMatt Cullina, CEO of business risk and identity management solutions provider IDentity Theft 911. "They're a growing target for hackers and thieves who know small businesses are especially vulnerable to exposures. Anything from a denial-of-service attacks, data lost to viruses or other security issues, or even something as simple as a hacked email can contribute to a costly, reputation-damaging situation."
In most cases, general liability policies will only cover you for reputational damage due to libel or slander. They don't directly cover losses due to data breaches and other exposures by third-party IT service providers. For this reason, it's important to consider a separate cyberinsurance policy on top of your general liability.
As your business grows, your insurance needs are going to change. The best thing you can do to keep your assets protected is revisit your general liability policy and modify it as necessary to cover your risks, Buckley said.
Originally published on Business News Daily.
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