However you may feel about the volume of litigation in the United States, if you're a business owner, you need insurance against the risk of your company being sued.
All companies, regardless of their size or industry, need liability coverage to protect themselves against allegations that employees did something (or failed to do something they should have) that caused property damage or injury to a third party.
Small business liability insurance, known as a commercial general liability (CGL) policy, is designed to protect your company and its assets against litigation that can be filed for any of a number of reasons, such as allegations of:
- Funds to maintain cash flow and payroll following the loss or disability of a critical team member
- Money to recruit and train a replacement employee
- Protection of company assets from a need to finance cash flow or repay debt suddenly
- Protection of other equity owners
Premiums will be based on a variety of factors, including the key person's age, health and medical history, whether he or she smokes, and other underwriting considerations.
Small business owners interested in key person coverage should consult with an experienced insurance professional, as well as a tax advisor, to arrange the most effective policy.