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Business liability insurance 101
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When starting a business, liability insurance is probably the last thing on your mind. That could be a serious and perhaps costly mistake.
The challenges of our current economy have inspired many to start their own small business. There are any number of goods and services that can be sold for profit while operating out of your home or a shared office. When you start your business you will most likely be a sole proprietor as opposed to a partnership or corporation. Each form of business ownership has its advantages and disadvantages regarding liability protection.
Being a sole proprietor does not require any extra paperwork or fees which would be the case for a partnership, corporation, or LLC (limited liability company). Because money is limited for the startup business owner, all attempts to lower costs must be made. One area in which you should not cut corners is the area of liability coverage.
Some business owners assume that the LLC form of ownership will give them all the liability protection they need but this is not the case. You will be personally liable if you have:
- Personally guaranteed a loan (which you will most likely be required to do)
- Personally injured someone
- Acted in an irresponsible or illegal manner
- Not operated your business as an separate entity
Business liability insurance will cover legal costs and damages that you must pay if you are sued for personal injury or for property damages. General liability insurance covers claims related to injury, property damages, and advertising claims. Product liability insurance covers cases related to injury as a result of using a product.
If you provide professional services such as legal, medical, or tax preparation, just to name a few, then you should carry malpractice or errors and omissions insurance. Check with professional organizations related to your area of expertise to find out about providers and coverage requirements.
For more information:
Protecting your assets with business liability insurance
5 Buying tips for small business liability insurance
Need more money? Get down to business
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