What You Need to Know About Small Business Liability Insurance

By Ted Rollins , last updated December 18, 2011

Liability insurance is a form of risk financing that is used by the insured party to protect itself from lawsuits. In the case of small business liability insurance, the specific forms of liability insurance will vary, but may include product liability, public liability, and employer insurance, depending on what type of exposure the business takes on. In the following, you'll find out more about these different types of liability insurance small businesses take on. Depending on the business's sector, certain forms of small business liability insurance may be legally required.

Public liability insurance is one type of insurance that's often included in small business liability insurance packages. Public liability protects a small business from claims made by the public who can become injured or hurt by the business. The sorts of businesses that need public liability insurance include those that the public is widely exposed to, such as malls, movie theaters, sports arenas, and hotels. When the scale of these places is quite large, the public liability aspect of the small business liability insurance can be very expensive.

Employer liability insurance is similar to public liability insurance, but deals with claims made by employees who are injured in the course of their employment. This sort of insurance is common in places with heavy machinery and factories. In the United States, worker's compensation programs operate separately from most small business liability insurance programs, meaning coverage may not be included.

Lastly, product liability insurance may be an important aspect of a small business liability insurance package. This insurance protects a company from lawsuits made by those using the company's products. Companies that produce food protect themselves from claims about bacteria or contamination using this insurance, as do makers of electronics who use the insurance to avoid claims about electric shocks and damage from repeated use.

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