Over 78% of businesses in the United States operate as partnerships or sole proprietorships. While simple to establish, these structures can expose both your business and your personal assets to significant liability risks. Adequate small business liability insurance is crucial for shielding your business and your personal finances from potentially devastating lawsuits and financial losses.
Many owners of limited liability companies (LLCs) or incorporated businesses mistakenly believe they are completely insulated from personal liability, assuming liability insurance is unnecessary. However, this is a dangerous misconception. You can still be held personally liable in several situations, including:
* Signing a personal guarantee for a business loan.
* Causing personal injury to another individual.
* Acting negligently or irresponsibly in your business operations.
* Engaging in illegal business activities.
* Failing to maintain your business as a distinct legal entity, blurring the lines between personal and business finances.
What Does Business Liability Insurance Cover?
Business liability insurance provides financial protection for your small business in the event of a lawsuit alleging personal injury or property damage. This coverage typically includes both the cost of damages awarded in a lawsuit and the expenses associated with legal defense. The specific types of liability insurance needed will vary depending on the nature and risks associated with your particular business. If you have any questions or concerns about your liability exposure, it is always advisable to seek professional legal counsel.