Business Liability Insurance: Definition, Costs, Coverage & Cost-Effective Options


Accidents happen all the time. And as a business owner, you need to be protected in case of accidents or damages in the workplace.

More so, it is important for business owners to not leave themselves vulnerable. They need to make sure they have insurance to cover all the risks associated with their business.

However, getting insurance for your business is dependent on your knowledge of business insurance.

And this is what makes this article very handy. As I’ve explained in detail what business liability insurance and companies that can give you the best small business insurance.

Let’s get started.

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What is Business Liability Insurance?

Business Liability, also known as general liability insurance is a type of insurance policy that protects the financial interests of businesses when they face third-party claims or lawsuits as a result of normal business operations.

Such policies cover-up for direct financial liabilities incurred, as well as any legal defense expenses. Additionally, it provides coverage to small businesses for medical payments, advertising injuries, bodily injuries, and more.

There are three main types of business liability insurance. They are:

  • Product Liability Insurance
  • General Liabilty Insurance
  • Professional Liability Insurance

Business Liability Insurance Coverage

In the event of a business-related lawsuit, small business owners are at financial risk. The management is vulnerable to outrageous expenses and is greatly in need of this type of insurance coverage.

Even as a Limited Liability Corporation (LLC), the owner may still be exposed to personal risk.

As we’ve established, business liability insurance protects a company’s assets and covers up for all legal obligations, such as on-site injuries by the employees, medical bills, and lots more.

Additionally, this type of insurance also covers the cost of a company’s legal defense, which includes settlement offerings, or compulsory awards a company is supposed to pay due to the legal judgments against them.

Some of these costs may include; non-monetary losses, compensatory damages, etc.

For a business that operates on another man’s land, that is, they rent a real estate property to carry out their transaction. Business Liability Insurance protects the business against liability from damage such as flood, fire, and other physical occurrences.

Finally, business liability insurance also covers false claims and advertisements, copyright infringement, slander, etc.

When it comes to safeguarding your business with reliable coverage, you can rely on the expertise of an insurance agency based in Lancaster, PA. Learn more about their offerings for business liability insurance and ensure the protection your company deserves.

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The Cost of Business Liability Insurance

Usually, the cost of business liability insurance is affected by the type of business being insured, as well as its geographical location. In other words, it is determined by a business’s risk level.

For example, a chemical engineer who works with harmful chemicals will pay more for insurance coverage than a clerk who sits behind a desk.

Businesses with a low-risk level may consider a business owner’s policy (BOP), which is a combination of property insurance and general liability insurance at a more friendly rate.

Small Business Liability Insurance

As a small business owner, you need to get liability insurance that protects your business from injuries that occur in your workplace.

The type of insurance you get depends on what type of business you have, and the risks associated with it. General liability insurance protects you in case of injury or death of a customer at your workplace.

Other types of business insurance available to you include;

  • Commercial auto insurance if you use vehicles for business purposes (other than commuting)
  • Commercial property insurance if you own or lease property for your business
  • Inland marine insurance if you transport inventory or equipment
  • Workers’ compensation insurance for your employees
  • Professional liability, also called errors and omissions (E&O), for professional service providers such as an architect, accountant, consultant, or lawyer

In addition to these types of insurance include employers’ professional liability insurance and cyber insurance. All these are specific to the company or its industry.

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What Does Small Business Insurance Cover?

Small business insurance is designed to give small businesses the financial protection they require in case of an accident at the workplace involving the business owner, employees, property, or customers.

According to Hartford, The average claim for customer injury or property damage is about $35,000. In cases where a claim leads to a lawsuit, a general liability claim can cost $75,000 or more to defend and settle.

The specific risks covered by small business insurance solely depend on the type of coverage you buy.

  • Workers’ compensation insurance covers work-related accidents or injuries that happen to employees while they’re on the job.
  • Commercial general liability insurance covers accidents or injuries to your customers or other members of the public at your place of business. 
  • Business property insurance covers damage to your business’s facilities, equipment, or inventory that result from a qualifying event. 

What Does Small Business Insurance Exclude?

As much as small business insurance protects your company against legitimate losses, it doesn’t cover up for issues that arise as a result of lack of maintenance of fraud, or your negligence.

Also, it may not cover you if you wrongfully describe the nature of your business or misclassify your employees.

Ultimately, small business insurance doesn’t cover your business if you experience losses due to natural disasters like floods, earthquakes, or hurricanes.

Individual coverages also have specific exclusions. For example, while worker’s compensation insurance protects employees in case of workplace accidents, they don’t cover accidents that result from carelessness.

Similarly, auto insurance doesn’t cover damages to vehicles that are not used for business purposes.

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What Is the Cost of Small Business Insurance?

Small business insurance costs vary widely based on industry, location, and coverage types. Owners of even the smallest businesses with no employees should expect to pay at least $800 to $1,500 per year for basic coverage.

However, business owners who own facilities or equipment, have employees, or give professional advice should all expect to pay more each year in order to protect against their specific risks.

Costs can also be higher for business owners who choose higher coverage limits, lower deductibles, additional coverages, or extra endorsements.

Best Small Business Insurance Companies

Several companies offer insurance to small businesses. However, knowing which one to work with depends on your insurance needs, and the coverage you want to purchase.

We’ve analyzed these companies to see which of them are the best depending on the type of coverage they offer, ratings for financial stability, industries they serve, and lots more.

Below are the best small business insurance companies;

#1. State Farm

State Farm makes the best small business insurance company because it offers multiple types of coverage through its large network of agents.

The best part is, they are business owners themselves. So, they understand the importance of having small business insurance.

State Farm sells insurance in every state and offers policies designed for each stage of a company growth cycle including general liability and other types of coverage that can be added to a policy to suit individual needs.

Additionally, state farm offers business insurance that is specifically designed for certain industries such as contractors, retailers, restaurants, etc.

Visit State Farm to get a quote.

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#2. Nationwide

Nationwide is a business insurance provider that provides simple, straightforward insurance solutions that is ideal for businesses with high-risk, general liability needs.

The company offers many types of business insurance including commercial auto, BOP, Worker’s compensation, etc.

In addition, it offers business insurances designed specifically for different industries like medical clinics, farms&ranches, to mention a few.

Visit Nationwide to get a quote.

#3. Hartford

Hartford is known for providing the best workers’ compensation policy because it offers employers a pay-as-you-go plan.

These plans reduce the chances of over-or under-paying premiums because costs are based on actual payroll.

Asides from these, Hartford offers many types of business insurance including general liability, BOPs, commercial auto, commercial flood, and data breach coverage.

Visit Hartford to get a quote.

#4. Travelers

Travelers is ranked the top commercial property insurance company in the United States according to the insurance information institute.

The company is known to offer insurance solutions in more than 20 industries including manufacturing, construction. and public entities. In addition, it has developed considerable expertise in commercial property insurance.

Because Travelers operates in the U.S., Canada, and the U.K., the company is well-suited to provide coverage for companies that do business internationally.

Visit Travelers to get a quote

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#5. Hiscox

Hiscox offers a core lineup of business insurance products including commercial general liability, business owners’ policies (BOPs), workers’ compensation, cyber liability, commercial auto, professional liability, and employment practices liability insurance (EPLI).

It is known as the best insurance company for independent contractors. Because they have products designed specifically for independent contractors.

Hiscox offers standard liability coverage limits up to $2 million, but higher limits are available upon underwriting approval. 

Visit Hiscox to get a quote.

Bottom Line

Being properly insured is critical if you want to protect your company. I hope this article provides you with the knowledge you need about business liability insurance.

All the best!


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