The Single Best Insurance Policy Every Small Business Needs

Small business owners don't usually love thinking about insurance. You're in business to make money, create products, meet people, drive growth, and generate forward momentum in life -- not worry about lawsuits, catastrophic losses, ruinous risks, and worst-case scenarios. But that's exactly why small business insurance is so important: it protects you from the unthinkable worst-case scenarios.

The right small business insurance policy can take a load off your mind, so you can do more of what you love as an entrepreneur -- and focus on your business. There's one type of small business insurance policy that every small business owner should buy, regardless of your industry, company size, or other unique details of your business. Maybe you've heard of it: small business liability insurance.

Let's look at what small business liability insurance is all about, and why your business needs it.

What is covered by small business liability insurance?

Small business liability insurance is sometimes called "small business general liability insurance," because it is an overarching policy that helps protect you from a wide range of risks to your business. In the same way that you need to have liability car insurance to protect you in case of a bad car crash, small business liability insurance makes it safer to "drive" your business forward.

Here are a few types of risks and threats that you can protect yourself from with small business liability insurance.

Personal injuries (and lawsuits)

A classic example of why businesses need liability insurance is "what if someone slips and falls down the stairs at your restaurant, and sues your business?" Business liability insurance can help defend you against lawsuits, resolve personal injury claims, and pay medical costs for this type of unfortunate situation (and others).

Property damage

There are various types of property damage and financial costs that your business could be held liable for:

• What if you own a construction firm, and one of your employees accidentally damages a customer's home during a renovation project?
• What if you're driving the company car and you crash into a building?
• What if your moving crew accidentally drops a customer's TV and breaks it?

Having property damage insurance coverage can help your business run more smoothly. It gives everyone peace of mind that you, your employees, and your customers are protected in case of accidents, mistakes, or other costly losses.

Professional liability

If your business provides professional services, like accounting, consulting, or advisory services, you can get a customized business liability policy that covers you in case of a lawsuit for professional errors, mistakes, negligence, or misjudgments. This type of coverage is also called "Errors & Omissions" (E&O). The best insurance companies can help you get a liability insurance plan that covers the particular risks facing your industry or profession.

Employment practices liability

Once your business hires its first employee, and especially after you have many employees, your liability insurance needs become more complicated. Employment practices liability coverage can help protect you in case of a lawsuit by an employee -- such as discrimination, harassment, wrongful termination, or other issues with employment law.

This type of liability insurance is usually not included with a general liability insurance policy; instead, you have to buy this coverage as an add-on endorsement. Also, this insurance is different from workers' compensation insurance, which your state will also likely require you to have for your employees.

Why every small business can benefit from liability insurance

Small business owners have a lot to consider: customer needs, product development, staying ahead of competitors, maximizing marketing, beating sales goals, getting paid on time, managing cash flow, paying the bills, and making payroll. The last thing you need in your life is another costly, unexpected check to write. Or worse, a financially and emotionally draining lawsuit that makes you pay legal fees out of your own bank account.

Small business liability insurance makes sure you don't have to pay for all these costs yourself. No matter what size of small business you own, or what industry you're in, you should buy small business liability insurance.

Bottom line

Ready to sign up for small business liability insurance? An independent insurance agent can help you find a good policy. Or if you like the insurance company that covers your home and auto, check to see if they offer business insurance too. The best home insurance companies often offer business insurance coverage, as well as personal policies.

Small business liability insurance is not usually expensive (typical premium costs might start at $40-$55 per month). But it can save you many thousands of dollars and provide priceless peace of mind.