Do you need SME liability insurance?

Oh, absolutely entrepreneurs do. If you run a small business, you interact with a customer on some level and this means you need to protect yourself with insurance.

While the costs vary by type of operation, the benefits of business insurance far outweigh the costs. And liability insurance helps protect your business. There are many types of business insurance products, making liability insurance a basic need for small business owners.

Let’s take a look at how professional and general liability insurance protects you.

What is Small Business Liability Insurance?

There are two basic types of liability insurance, professional indemnity insurance and general liability insurance. Business owners may need one type or both:

General liability insurance – General liability insurance is the most common business insurance. General liability coverage protects your business if a customer or visitor is injured at your business location. General liability insurance also protects against damage you cause while doing business. For example, you are a contractor and you break a customer’s window when you hang your sliding ladder. General liability insurance also protects your business against claims of reputational damage (someone claims libel or defamation) and advertising damage (someone is hurt by your product claims). It protects against errors in the service provided. For example, you are a financial planner and an investor’s portfolio is moving south. Or you’re a couple’s counseling therapist and someone thinks you’ve given bad advice.

Which companies need liability insurance?

You may need both general liability insurance and professional liability insurance.

You need general liability insurance to run a business. Without general liability coverage, you expose yourself to lawsuits related to your products and are not covered for property damage you cause or accidents that happen to a visitor to your business. If a salesperson or visitor has a slip/fall injury at your business location, you are not covered.

You may need both types of business insurance if you provide professional services. Here is an example: You are an accountant. One of your tax return clients slips on a wet floor in your office bathroom and tears an ACL. That’s where general business liability insurance comes in handy.

You advise a tax filing client and recommend another way to handle equipment depreciation to reduce taxes. Two years later, the client hears from the tax authorities. Your advice was incorrect and the customer owes back taxes. That’s where professional indemnity coverage would provide coverage.

What does general liability insurance cover?

Here’s a more specific overview of what small business owners need to know about general liability insurance coverage.

Medical expenses

General liability insurance covers you if a visitor or customer sustains physical injury at your business location. The person’s bills for medical treatment can be astronomical, and client injuries can result in medical bills, court costs, and attorney fees — an obvious reason for you to purchase general liability insurance.

Property damage

If you go to customer property to do work, your general liability policy will cover you if you cause property damage. For example, you are a landscape gardener and you cause material damage to a building when a stone falls from a mower, or you drive over a row of hydrangeas. In either case, you damaged someone’s property while performing services, and you are legally responsible.

Legal Defense Fees

One of the highest payouts an insurance company will pay for general liability claims isn’t for personal injury — it’s for the cost of legal fees. For example, slipping/falling in the bathroom of a customer’s ACL causes stress and loss of income. In addition to demanding payment of medical costs, the client demands additional money. Your general liability policy will cover the costs of legal defense, including legal fees and related costs.

Personal and Advertising Injury

Business liability insurance covers you if someone claims that your product was promoted by false advertising. For example, you sell a mattress that is “guaranteed to reduce back pain” and someone claims it didn’t work.

Personal injury claims come from someone who believes you have defamed or defamed their business. For example, you operate a food truck and one of your employees tells a customer that someone else’s food truck company does not enforce cleanliness standards.

What does professional liability insurance cover?

Errors and omissions

This is broad coverage and protects you against a general liability claim of negligence, misrepresentation or breach of good faith.

As you can imagine, these are terms and conditions and claims usually have legal fees. Your insurance company will cover defense costs, including legal costs, the amount of a settlement/judgment (up to what is stipulated in the policy) and administrative costs (such as preparing documentation).

What is not covered by business liability insurance?

Now that you know what’s covered, here’s what’s not covered by this type of small business insurance:

Commercial Property Insurance – Your general liability will cover you if you damage other people’s property, but to protect your own company property you need commercial property, which protects your building and company equipment. You may need business property insurance even if you operate out of your home, unless you can get a “rider” from your homeowner’s policy to cover your business. You need commercial real estate, even for properties you rent. Commercial auto insurance – Yes, you will need separate commercial auto insurance to cover a vehicle or vehicles that you use to conduct business. Workers’ Compensation – If you have employees, you will need a separate workers’ compensation policy. In this age of subcontractors, many small business owners choose to purchase an workers compensation policy that covers part-time and/or temporary workers, even 1099ers. Cyber ​​Security – Many insurance companies choose to add this to their liability coverage or offer it as a separate policy. For example, you can get a business owner policy that includes general and/or professional liability coverage, plus cybersecurity. Cyber ​​security is necessary for all normal business activities that require customer personal information as part of doing business. It is one of the most overlooked and needed insurance products for small businesses.

Small Business General Liability Insurance Cost

How much does general liability cost? The cost of the insurance policy varies by specific company and the amount of income the company has. It may also vary by your chosen coverage limits. Choosing an insurance company that offers umbrella coverage, such as business insurance, lowers your general liability insurance policy.

In general, you can expect to pay just $29 a month for basic business liability insurance.

Small Business Professional Indemnity Insurance Cost

Rates vary from one insurance company to another. Professional liability insurance differs per type of company and per annual turnover.

In general, you can expect to pay just $20 a month for basic coverage limits.

How to choose the right liability insurance for your small business

Before taking out general liability insurance or professional indemnity insurance, talk to a lawyer about setting up your business as a limited liability company. By forming an LLC, you can gain financial protection by separating your business assets from your personal assets.

Here are some tips for the small business owner:

Network with other small business owners Shop online. With just a few clicks you can start viewing quotes. Personal shopping. Get a quote for general liability insurance and, if necessary, a professional indemnity quote, and compare. Carefully consider the deductible. With each claim, your rates will increase. Is it better to have a higher deductible – with the intention of paying the damage and not making a claim? How much can you afford to pay out of pocket? Evaluate your quotes. As a final deciding factor, call the customer service you would use to make a claim. See if you can tolerate the wait.

Best General Liability Insurance for Small Business

Every entrepreneur needs general liability insurance. Many also require professional liability insurance.

We have chosen companies that offer both. These companies also offer a Business Owners Policy, or BOP, which can help you save money by combining policies under one umbrella.

These companies also offer cyber insurance and other insurance products. For example, Progressive offers commercial auto insurance.

The Hartford

The Hartford offers a wide range of additional insurance policies and can also provide financial advice.

state farm

State Farm offers riders to homeowners policies for many home-based businesses. If you’ve set up your home business, you can save money by purchasing a rider instead of a separate policy.


NextInsurance is the go-to for contractors and landscapers who want to quickly set up a policy. NextInsurance also offers policies for daily, weekly or monthly periods.


Biberk Insurance is favored by subcontractors working at third party locations. Biberk offers many insurance policies.


Progressive is known as an auto insurance company but offers many types of business insurance. Since it offers both general liability insurance and a commercial car, you may be able to save money by using the same carrier to purchase both types of insurance.

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