Small Business Liability Insurance

In a society where most people can sue for anything, accountants and attorneys recommend that even small businesses protect their assets from litigation.

"Even frivolous lawsuits...can be very expensive to defend," says Jim Heeter, managing partner of the Sonnenschein law firm in Kansas City, according to an article by Alan Goforth in

Liability insurance can protect a business from lawsuits arising from any bodily injuries that occur on people around the business premise, and those that are results of the actions or negligence of one employee, according to, online media and e-commerce company. Liability insurance can also protect a business from property damage caused by employees.

"Forming a legal entity and purchasing the proper insurance are the foundations of asset protection," the article said.

Accountants and attorneys suggest that an individual owning a business must consider incorporating or setting up limited Liability Company or limited liability partnership, rather than managing the company as a sole proprietor.

"An LLC or LLP offers greater flexibility in governance and management than other structures, and can provide substantial protection from individual assets," Mr. Heeter says. This is to avoid plaintiffs from going into the personal asset of a business owner in litigation.

Next, a business owner must secure liability insurance.

General, professional, product, and employment practices liability insurances are the four types of liability insurance, according to General insurance often covers lawsuits that small businesses will typical encounter. A professional insurance is essential in the service industry; product liability insurance in manufacturing.

Aside from protecting a business from any liability, insurance can help provide resources to defend any claims brought against a business. A business owner could be tempted to ignore this protection when cash is hard, but a proprietor must be aware that a major liability issue can potentially end a business.

A recent survey commissioned by the Independent Insurance Agents & Brokers of America found that nearly 60 percent of the nation's 11 million home-based businesses do not have insurance coverage, according to Daily Record/Sunday News.

In finding how much liability insurance one business needs, there are some guidelines, but no standard formula, according to, which owns and operates, an online consumer insurance information service.

“Find a balance between too much insurance and a bare-bones policy,” said Vernon Jacobs, a CPA in Prairie Village, according to Mr. Jacobs has written and published several books about asset protection, according to the article.

Darrell Zahorsky of offers tips in buying insurance. He recommends that businesses sign up with trade associations and business groups for the possibility of purchasing insurance at group rates. He also suggests that they compare the extent of business liability coverage offered by different insurers, make researches about the level of coverage of businesses in the same industry and the average legal costs and settlement to set coverage limits. He also suggests getting a package deal rather than purchasing separate types of insurance, and getting a specialist broker to get the best available coverage and rates.


  • Josh Shorter said on September 8, 2009
    My name is Josh Shorter and I help small business owners find affordable property and liability insurance. My number is 214.808.4517 or email me at Thank you.
  • Ajaz said on June 25, 2010
    hi it's ajaz i want to open a security farm but i dont know how to start, what insurance i need for that business. could u help me
  • Victoria Yusko said on February 11, 2015
    I am in search of insurance for general liability and property insurance for a commercial building I own. There is no business established. Looking for recommendations and quotes.


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