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Is Commercial Liability Insurance Mandatory?

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Is Commercial Liability Insurance Mandatory?

Commercial liability insurance is a type of policy that covers issues related to personal injury and property damage. If one of your customers gets hurt or their property gets damaged while they are on your premises, this type of insurance can pay for the resulting damage. Whether or not you have to get liability insurance depends on your business’s location and your field.

In California, there is no legal requirement to take out liability insurance, but most small and medium-sized businesses do so because it protects them from extremely expensive lawsuits. If you deal with customers in person, have a physical location where people visit you, or advertise publicly, it’s likely that you should take out a policy. Read on to find out more about liability insurance and to discover how you can find the best policy for your needs.

Is Commercial Liability Insurance Mandatory? 

Not every state has the same rules and regulations regarding liability insurance for businesses. For example, you must take out a policy if you are a lawyer in Idaho and Oregon. Similarly, doctors need liability insurance if they want to practice in Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, or Wisconsin, and some states require realtors to be insured.

If you run a small company in California, you don’t have to get a liability insurance policy. However, it could be a good idea to do so anyway because there is no cap on liability lawsuit rewards in this state. Therefore, you could lose hundreds of thousands or even millions of dollars if someone gets injured or their property gets damaged while they are at your business location or working with you.

Who Needs Liability Insurance?

Since liability insurance isn’t mandatory in most states, you might wonder whether you need to take out a policy, especially if you don’t have a shop or office. Could you save your money and invest it in the business instead? Unfortunately, we live in a very litigious society, and lawsuits against companies are extremely common. Therefore, skipping insurance isn’t a good idea for most businesses.

Anyone who has a physical location where they are visited by customers must take out a policy because they are at high risk of being sued. Similarly, those who deal with customers outside of a shop or office should also consider insurance. Even if you conduct your business online only, you might need to protect yourself because you could face a lawsuit related to your advertising practices.

You Have a Physical Location 

Countless small businesses have a physical location, where customers interact with employees face-to-face. This includes shops, cafes, restaurants, gyms, leisure centers, and many types of offices. If you run such a company, you should look into liability insurance because you are responsible for your customers while they are at your business location.

For example, if someone slips and breaks their hip in your shop or office, you’ll have to pay for the resulting medical bills, loss of income, and potentially for the emotional trauma. Similarly, you’ll be responsible if your customer’s car or another valuable item gets damaged while they are at your location. To protect yourself against these costs, you can get a liability insurance policy, which pays the compensation as well as the legal fees associated with the case.

You Deal with Customers 

Not every business operates out of a physical location, but that doesn’t mean that liability insurance should be skipped. If you deal with customers in person, it’s likely that you need to get insured. This is especially true if you visit people at their own house, for instance to fix their electrical systems, to work on their plumbing, or to look after their garden.

For some businesses that visit customers at home, general liability insurance will be enough, but others need a policy that is specific to their needs. To find out which type of insurance is best for you, you can contact an agent at ISU Armac. We can show you various options, such as contractor insurance, property manager insurance, and landscape services insurance.

You Advertise Your Services 

Most businesses do their research before they publish a social media post or submit an advertisement. However, mistakes can still happen, and they can be extremely costly. If you are advertising your product or services publicly, you should take out liability insurance because you could be at risk of a lawsuit if you inadvertently post false information or offend someone.

What Types of Insurance Are Mandatory for Businesses in California? 

While you don’t have to get commercial liability insurance in California, there are other types of insurance that are mandatory, namely workers’ compensation insurance and commercial auto insurance. The first is designed to pay out if an employee files a lawsuit, and it is mandatory for any business with one or more employees. The second protects your investment in your vehicle, and you have to take out a policy if you have a company car.

Workers’ Compensation Insurance 

Business owners who employ at least one other person must get workers’ compensation insurance in California. The aim of this type of insurance is to protect businesses from lawsuits filed by employees. If a worker gets injured while on the job, the policy will pay for their medical bills, disability benefits, and job displacement benefits. It can also cover end-of-life costs or additional costs related to the employee’s return to work.

In many cases, issues related to mental health and discrimination are also covered, as long as they are severe enough to prevent the employee from doing their job. However, you should speak to your insurance agent about the details of your policy. If you’re an independent contractor or a sole proprietor, you should also look into workers’ comp because it could help you access compensation and benefits after an accident.

Commercial Auto Insurance 

Countless businesses rely on their fleet of cars and vans. Even if you don’t transport passengers or goods, you might need your vehicle to get from one customer to the next or to run errands for your business. Everyone who has a vehicle that is used for commercial purposes must get auto insurance, which covers the property damage, personal injuries, and legal bills related to accidents on the road.

If one of your workers has an accident while driving a company vehicle, your firm might get sued. In such a case, your insurance policy pays out, so you don’t have to use your business’s funds to pay for compensation. In California, you have to take out a 15/30/5 policy. This covers $15,000 per person involved in the accident, $30,000 total for personal injury, and $5,000 for property damage.

How Can I Find a Good Insurance Policy for My Business? 

As you can see, getting insurance for your business can be tricky, especially since commercial liability is just one of the policies you should take out. Depending on the type of business you run and the risk factors involved, you’ll also need specialized insurance, which might include commercial property insurance, cyber liability insurance, errors and omissions liability insurance, and key man life insurance.

With so many policies and providers, it can be hard not to lose track. To make sure all your risk factors are covered, you should get in touch with an insurance agent. They will evaluate your business and then suggest which types of insurance you need. Then, the agent can provide you with quotes from the best providers in your area and help you compare the various offers.

How Much Should Liability Insurance Cost? 

An average business pays $50-70 per month for general liability. However, this figure varies greatly because it depends on your business’s size and turnover, the risk factors in your industry, and the amount of coverage you’ve chosen. A policy that only covers damage up to $1 million will cost a lot less than a policy that pays out $5 million. Similarly, an office is cheaper to insure than a high-risk sports facility such as a trampoline hall.

Your insurance agent can help you find reasonably priced policies. It’s important to remember that the cheapest isn’t always the best. Although you should avoid overpaying, you must make sure that you are well covered and that there aren’t any gaps in your insurance. Once you’ve set up your policy, you and your agent can meet once a year to re-evaluate your situation and determine whether the level of insurance you have is still right for your business.

Contact Us to Get Started

While there is no legal requirement to do so in California, virtually every business needs to take out commercial liability insurance. A lawsuit related to property damage or personal injury can be extremely expensive, and having insurance in place is the best way for small firms to protect themselves. Anyone who deals with customers, gets visited in a physical location, or advertises their product or services should consider taking out a policy.

In addition to liability insurance, California businesses must also look into workers’ compensation insurance and commercial auto insurance. These types of policies are required, so they can’t be skipped. Fortunately, you don’t have to find insurance on your own. A highly trained agent can compile relevant quotes for you and help you find the most suitable insurance provider. Call us today at ISU Armac to get started.