If you’re a small business owner running the enterprise as a sole trader, it is crucial you protect yourself from the risks associated with running a business. As a business owner, you’ll have to hire the right staff, meet overhead costs, procure goods and services, market your business, get affordable financing and serve customers by yourself. In between all these, you also have to protect your business from risks. There is the risk of lawsuits, workplace injuries, property damage due to fires and natural disasters among other things. By purchasing a business owners insurance policy, you can protect yourself and your business from most of these risks. You’ll need Public Liability Insurance because you can also be sued by third parties.
Why You Need to Get covered
Businesses that are run as companies have several advantages, one of them being that any liability falls on the corporation and not the individual shareholders. With sole trader businesses, however, all liability falls on the business owner. This is because the business and the business owner are one and the same. As a result, sole traders face greater risk from lawsuits than other businesses. That is why they need sufficient coverage from business risks.
What General Liability Insurance Offers
As a business owner, you can be sued by your employees, disgruntled customers, and other stakeholders. The personal injury lawsuit can be financially crippling for a number of reasons. For starters, the cost of fighting the lawsuit may be beyond your financial reach. Secondly, if the case is decided against you, the cost of damages may render you bankrupt. You will have to close shop and sell your personal assets to pay the damages. Therefore, you need to have some form of protection. The good news is that public or general liability insurance offers sufficient coverage against the following liabilities:
1. Legal Costs
The cost of mounting a strong legal defense in a personal injury case can be quite substantial. Whether you win or lose the case, you must pay legal fees. Fortunately, general liability policies usually pay the full cost of legal services. This means that you will not have to worry about hiring the best lawyer to represent you when you have been sued for one reason or another.
2. Damages
The insurance cover will also pay the damages awarded by the court. Depending on the nature of the suit, the damages awarded by the court may run into the hundreds of thousands of dollars or even millions. Most sole traders are not able to pay even a fraction of this amount. Fortunately, the insurance policy will pay the full cost of damages. This may include punitive damages and compensation demanded by the plaintiff.
What to Look for in an Insurance Policy
There are many insurance companies in every city, and they may all claim to offer the best coverage for sole traders. However, this may not be the case, so you have to do some research to identify insurance companies that offer the best liability protection to sole traders. In this regard, below are key factors to be taken into consideration when looking for a suitable insurance policy:
Liability Coverage
General liability insurance is meant to protect the sole trader against liabilities that may arise from lawsuits. The ideal policy should pay the full legal fees incurred while fighting the lawsuit. It should also pay for the damages awarded by the court. Property damage, pain and suffering, lost income and medical costs incurred by the plaintiff should all be covered in full. Before purchasing any policy, make sure all liabilities are covered.
Coverage Limit
All the liabilities that may arise may be covered, but not fully. For instance, a policy may offer a liability coverage limit of $300,000. This means that if the total liabilities amount to $500,000, you will have to come up with the $200,000 difference out of pocket and so on. Therefore, you have to check the liability coverage limits offered by different policies to ensure you are sufficiently covered.
Premiums
The cost of purchasing an insurance policy is a key factor to be taken into consideration. Therefore, you have to request quotes from all the insurers on your list and compare their premiums. Be sure to compare premiums hand in hand with the type of coverage offered as well as the coverage limits. This will help to ensure you get the best general liability insurance cover for your sole trader business.
It is important to note that there are many insurance companies with different types of insurance products for businesses. Since they are all different, you should consider working with an independent insurance broker. These are professionals with in-depth knowledge of the industry. They can easily help you find the perfect cover for your business. Only insurance brokers who have focused on business insurance should get any consideration.
