The World Bank continues to rank the US relatively highly for its ease of starting a business. Over the last decade, the US continues to lead globally in the number of new business formations, according to data published by the US Business Formation Statistics. Interestingly, annual startup applications have increased by 74%, from 2.5 million in 2020 to 4.35 million in 2020.
Just in Q3 of 2020, there were almost a million and a half applications. So far, 2021 seems set to be a record-breaking year. Several factors are driving the increase, including unemployment and people striving to meet the changing needs of consumers.
Starting a business is both exciting and daunting for every new entrepreneur. Depending on the type of business, startup costs vary, but there are several calculators available that help prospective business owners work out the costs. Besides the incorporation fees, startups also need to consider office space, employees, inventory, marketing, utilities, and insurance.
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Why Must a Business be Ensured?
There are many different types of insurances that a business may need. These insurances include protection from customers in case a lawsuit is filed, disaster insurance, and workers’ compensation. Some business insurance is required by the law, and these requirements change depending on the industry. Unemployment and workers’ compensation are both compulsory to protect workers.
Even though it can be tempting for smaller businesses to forego insurance that is not mandatory to save on expenses, insurance is an investment that can often save a business if disaster strikes. One of the most important insurances for every business is general liability insurance.
Understanding General Liability Insurance
General liability insurance is not required by law in most cases, but sometimes clients, employers, or property owners expect a business to hold such a policy. General liability insurance protects a business in many ways, especially if the business is sued by someone injured on its property, or by a product manufactured or sold by the business.
Additionally, the policy also covers any damage on business or client property caused by the owners or employees. Commercial liability insurance also covers medical payments for accidents on the business property, all types of personal liabilities (libel, slander, or false arrest), legal costs, and advertising liabilities (including copyright violations). Finally, businesses offering professional services use liability insurance to cover risks like malpractice claims.
How Can General Liability Insurance Protect An LLC?
The main benefit of general liability insurance is the protection of the assets of the startup. However, the policy also demonstrates to others dealing with the business that it is a serious and secure enterprise to do business with.
Employees are also assured that they are working in an environment that is protected from any unusual outcomes. For many businesses, a general liability policy instills confidence in future clients who are assured that any mistakes will not be their liability.
What is the cost for liability cover?
Depending on the needs of the business, costs can vary, with the minimum being $300 annually. The cost can rise to $1,000, or more, but this depends on quite a few factors.
General liability premiums are affected by several variables, with risk exposure being the most important. Other variables include location, the number of employees, deductible limits, the amount of coverage per incident, and the amount payable for the policy period.
Businesses that employ risk management processes lower their risk of an insurance claim, and can effectively lower their premiums, making them even more cost-effective.
Risks not covered
Despite being considered “comprehensive insurance,” general liability insurance doesn’t cover everything. For instance, warranties offered to clients by the business and intentional acts aren’t covered. Professional liability insurance is required for businesses offering services and advice that can cause damage to clients. Employees of the business are covered by worker’s compensation insurance for injuries at work, and by unemployment insurance for work termination.
If the business owns the commercial property it operates from, commercial property insurance is needed to ensure the property is protected from risks like fire or storms. Finally, the vehicles used for the business are covered by commercial auto insurance.
General liability cover is relatively cheap while offering the foundational coverage required by every startup in 2021. The low cost of its premiums offers every new business owner the peace of mind of knowing their business is protected as they continue to grow it.