Common Areas of Business Liability and How to Address Them

Regardless of how small your business is, you can still be personally at risk if something were to happen to the company. That's why it's vital to understand potential business risks and learn how to guard your company and your finances against costly business liabilities.

According to Forbes small business insurance statistics, a Next Insurance survey showed that 96% of small business owners revealed they don't know the basics about small business insurance after taking an insurance knowledge test in 2023. It's important to understand common risks that can impact your business so you can better prepare for the future. We've outlined some common business liability risks to help you determine what coverage you might need.

Common liability risks

No business is immune to risk. Injuries and accidents in the workplace are common, and getting caught unprepared can be costly.

Business liabilities aren't just limited to bodily injury or property damage. Data security and vendor disruption can pose risks, too.

It's important to prepare for potential risks specific to your business and industry. The reputational damage from a serious accident, data breach or quality control issue with a vendor can drive away customers and negatively impact your business's ability to generate revenue. While it’s important to prepare for potential risks specific to your business and industry, there are some common liability scenarios.

• A customer is browsing your retail store and trips on a box left on the floor, breaking their wrist. The customer can sue your business for medical expenses from their injury.
• Your employee is on a house call fixing a plumbing issue, but they accidentally knock the customer's laptop off their kitchen table, breaking it. The customer can file a claim against your company, citing damage to their property and looking for reimbursement.
• You've set up a new social media advertising campaign, but a competing brand thinks you've copied their slogan. They may be able to sue your company over intellectual property rights.

Handling all these areas of risk can be complex, especially if you're a smaller business without sufficient internal resources to stay constantly vigilant of all your liabilities. That's why understanding the potential risks can help you take the right steps to protect your business.

The role of liability insurance

Business liability insurance is interchangeably referred to as general liability insurance. In its most basic form, liability insurance helps provide a layer of protection for your business in the event of damages, personal injury or bodily injury at your place of business.

For many business owners, liability insurance is crucial because it covers a large range of potential risks. Depending on the type of policy you get, insurance can also cover medical expenses, legal defense costs and property damage.

Choosing a policy

A quick online search for business liability insurance can provide you with a lengthy list of options. Here are a few key factors that can help you determine which insurance provider will fit your needs.

Your risk level

Not all businesses face the same level of risks. A company that has a small factory will face more potential risks than a simple retail storefront. The more potential risks there are to your company, employees and customers, the more coverage you may need.

How much coverage you need

Coverage is determined by the type of business you have and the risk levels associated with it. However, it's still important to consider factors like your industry, location and yearly revenue to find the best policy for your needs.

Coverage specific to your industry

Review your business operations to help determine what kind of coverage you need. Ideally, you'll want to work with a provider with experience covering businesses similar to yours. This can help you get the coverage you actually need versus a more generalized policy that could leave you open to liability.

Understand how claims are processed

When shopping for liability insurance, consider how claims are processed. What's the timeline for resolution? Can you make a claim anytime, 24/7—or do you have to wait until regular business hours? Ideally, you'll want a provider that can process claims quickly, on the schedule you need.

The bottom line

All businesses face potential risks, depending on factors such as their size and industry. The best thing you can do is evaluate your business operations and determine where the risks may lie. This will help you find the best insurance policy to help protect your reputation and assets.