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Last week, we looked at three types of insurance coverage that every business owner should have. While buying insurance coverage may seem low on your to-do list, making sure you and your business are protected from lawsuits is one of the most important things you can do for your business.
After all, your business can’t grow and succeed if you’re forced to sell it to cover lawsuit expenses! This is especially true for smaller companies. While you may think your chances of being sued are lower than a large corporation, the damage your small business could sustain due to a lawsuit is all the more harmful because your business likely doesn’t have the liquid cash reserves you’d need to pay off the costs of being sued.
Facing a lawsuit as a small business isn’t just stressful, but it could cost you your entire business!
Instead, investing in appropriate insurance coverage will give you peace of mind and let you focus on expanding your business knowing that if something happens, you’ll be able to handle it and move forward with confidence.
Here are two more types of insurance you should never go without!
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Employment Practices Liability Insurance
A lesser-known but very important insurance coverage for business owners is Employment Practices Liability Insurance or EPLI. EPLI insurance protects you against lawsuits filed against your business by your own employees under claims that your company violated their workers’ rights.
Types of lawsuits covered under these policies include:
- Wrongful termination
- Poor management of employee benefit plans such as retirement accounts
- Sexual harassment claims
- Discrimination
- Infliction of emotional distress
- Breach of employment contract
In our increasingly litigious world, the chance of being sued by one of your own employees is greater than ever. While every business owner should have policies in place to reduce the likelihood of employment issues that can lead to a lawsuit, there’s always still a risk, and that risk is simply not worth it.
If you aren’t sure how to get EPLI coverage, start by talking to your general liability insurance policy provider to see if they offer it as a rider on your general liability policy. Otherwise, many companies offer affordable stand-alone EPLI policies.
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Professional Liability Insurance
Last but certainly not least, professional liability insurance is an essential safeguard for service-oriented businesses. Also known as errors and omissions insurance, this coverage protects your business against claims arising from errors, omissions, or negligence in your professional services. Even the most seasoned professionals can make mistakes, and in such cases, your clients may seek compensation.
Professional liability insurance provides financial protection by covering legal fees for your defense and money for settlements and damages paid to the suing party. If you need a license to do what you do – such as doctors, lawyers, contractors, and accountants – professional liability insurance is an absolute must.
These policies also usually include an option for “prior works coverage” and “tail coverage” that extend your policy coverage limits for work you did before taking out the policy and for work you completed during the policy term even after you’ve canceled that policy.
For example, a tail coverage policy will cover an error you made while doing tax work for a client during the policy term, even if the error isn’t discovered by an IRS audit until two years later when you are no longer paying premiums for the policy.
Protecting Your Business and Planning for Its Future
As your Personal Family Lawyer®, it’s my passion to help business owners create businesses and lives that they love, and that starts with a strong foundation that protects you and your business.
That’s why I offer the LIFT™ Business Breakthrough Session to make sure your Legal, Insurance, Financial, or Tax systems are set up for success. Once you have the essential building blocks in place, I support my clients as an extension of your team with monthly support that helps you grow your client base, understand your cash flow, and plan for steady, reliable growth.
If you’re ready to take the next steps toward building and protecting your business, Schedule your free 15-minute discovery call at this link. I can’t wait to be part of your team.
This article is a service of Element Law Firm, PC International Business Strategy and Estate Advisor. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.CLICK HERE TO SCHEDULE!
