According to a recent survey, roughly 40% of small businesses owners claim that they have absolute no business insurance protecting their business, claiming that it is not a sound financial decision for their company at the moment.
However, the truth is that in nearly all cases it is better to pay the price for business liability insurance than to undermanage risks that could attack your business. When you leave your business vulnerable to risk, you risk bankrupting the entire company, and ruining all the hard work you and your team have completed over the years and even decades.
So, once you decide that you will indeed purchase business liability insurance, you will need to decide how much to purchase. This is an important question to ask, especially since overspending will wrongly move funds away from meaningful business ventures while underspending will leave vulnerable gaps in which your business could suffer a lawsuit.
A common rule of thumb is that there should be a minimum of $1,000,000 in general liability and professional liability each. However, this number fluctuates tremendously based on a number of factors, including:
- What kind of business you own
- What are the legal minimum insurance levels set by your state law
- What kinds of business liability insurance are appropriate for your business
For example, if you run a food delivery truck service, you will most likely need to purchase higher auto liability insurance. Additionally, if you regularly provide professional advice and recommendations to high-powered clients, you will likely have to purchase E&O insurance.
Consequently, it is best to speak with an insurance agent who can carefully analyze your entire business situation, and provide a thorough and accurate recommendation on how much business liability insurance to purchase.