Small business owners don’t just have to focus on keeping costs down and increasing sales, there are also a lot of other things that go into making a business successful, including managing risk. Many a well-run business has been blindsided by burglary, arson, freak accidents, and other misfortunes. Identifying likely risks and taking steps to avoid or mitigate them, such as having a solid general liability insurance policy, will help businesses avoid headaches and costs that can cripple their endeavor.
Bad luck can happen to anyone, and even the most careful business owner can encounter a misfortune that leads to financial loss. It could be a burglary that results in the theft of valuable merchandise. It could be a customer slipping in the store. Industry experts predict that about 40 percent of small businesses will experience a property loss or a situation where they’re liable for harm to another person or business in the next 10 years.
Top Causes of Property and Liability Claims
Insurance Journal recently listed the top 10 causes of property and liability claims based on research conducted by a leading insurer.
1. Burglary and theft – Burglary and theft are by far the largest causes of property and liability claims for small businesses. These claims accounted for about 20 percent of all claims filed by businesses.
How to mitigate it – Simple security measures will help reduce your chances of burglary and theft. Locks for doors and sensitive areas, a buddy system for making deposits, electronic security equipment, and good security practices can prevent your business from being victimized by criminals.
Internal threats are also a cause of big losses among insurers. According to CNBC, employee theft costs U.S. businesses $50 billion per year. Small and mid-size businesses bear the brunt of employee dishonesty. Instilling good morale and accountability can help small business owners mitigate this threat.
2. Water and freezing damage – These claims typically involve damage to a physical location caused by water leaks and frozen water. Examples include roof damage from snow or water damage caused by frozen pipes bursting.
How to mitigate it – Good property maintenance can go a long way to reducing your chance of falling victim to these hazards. Keep your roof clean and clear of debris that may accumulate water. Inspect your plumbing regularly and make repairs if needed. Also, take care to cover your pipes in freezing conditions.
3. Slip and fall injuries – If a customer slips and falls at your business, a court could hold you liable for his or her injuries and award damages to the customer. Businesses that have a lot of foot traffic are at elevated vulnerability for these types of accidents. Slip-and-falls are among the most common injuries; more than a million people are injured in these accidents each year, at home or at other locations.
How to mitigate it – Making sure your property is free of slip-and-fall hazards such as loose steps and hand railings, slick floors, and clutter can help reduce your chances of having a slip-and-fall occur on your property. Putting up signs to warn customers of hazardous conditions—such as a wet floor from a spill or mopping—can also reduce the chance of a fall and may reduce your liability.
4. Other injurious accidents – Slip-and-fall accidents aren’t the only source of customer injury you have to be worried about. For example, a visitor to your store might be injured if products fall from a top shelf and strike him or her.
How to mitigate it – Regularly inspect your office or store for safety hazards, such as unstable displays, heavy objects on top shelves, etc. Keeping your place of business tidy and clean will give customers a good impression and keep them safe.
5. Reputational harm – Business owners may be sued if third parties can assert a claim that the business owner or employees caused damage to their reputation. Advertising maliciously disparaging a competitor or social media posts ridiculing a third party can give rise to these claims.
How to mitigate it – Business owners and their employees need to be careful with their advertising materials and their social media posts. Avoid untrue statements and also avoid using other people’s social media photos and videos without permission.
6. Vehicle accidents – Businesses that use automobiles or other vehicles such as forklifts or ATVs to transport products or people need to be aware of the risk these operations pose. Should an employee operating a company vehicle or a personal vehicle used on your business’s behalf cause injury or property damage to another party, your business can be held liable.
How to mitigate it – Businesses using vehicles need to take care to only allow qualified persons to use these vehicles. Driving and certification requirements can help, as can regular vehicle safety training. Employees who misuse vehicles must be held accountable to manage risk.
7. Product liability – If your business manufactures consumer products and those products harm consumers or others, your company could face a product liability suit. Some examples of product liability suits include food products that make people ill, cosmetics that burn the skin, electronic devices that catch fire, etc.
How to mitigate it – Proper testing and good manufacturing practices can help prevent shoddy products from hitting the market. If a problem is discovered, do not hesitate to issue a recall, as the cost of lawsuits can easily outweigh the cost of a recall.
The Costliest Claims Aren’t the Most Common
Some of the most common property claims aren’t the most costly. While burglary and theft account about 20 percent of property and liability claims, making them the largest individual source of claims, they cost just an average of $8,000 per claim. Reputational harm claims are less common, making up less than 5 percent of general liability claims, but have an average cost of about $50,000 per claim.
While you can’t anticipate every eventuality, you can determine the threats most likely to impact your business and take steps to reduce your exposure to liability claims from these risks.
Commercial Liability Insurance: Your Best Protection
Small business owners face a lot of risks in pursuing their dreams, but a good insurance agency can help. Business owners with a strong commercial general liability insurance policy can sleep easier at night, knowing that their life’s work is protected in the event of an unfortunate accident.
Commercial general liability policies are insurance policies that provide coverage of claims for bodily injury and property damage arising from the operations of a business. If a third party is injured or suffers damages resulting from your business’s operations, this policy will cover the cost of defending any lawsuit that may be filed and paying potential damages, up to the limit of the policy.
A good CGL policy can protect you from lots of risks, but it won’t cover every type of claim. For example, a CGL policy won’t cover fire or storm damage to your store or office, employee injuries, or claims arising from employment disputes. You’ll need to find which other liability insurance covers those risks, such as commercial property insurance or workman’s compensation insurance.
When seeking commercial general liability insurance policies and other business insurance policies, it pays for business owners to work with an insurance agency with extensive experience in working with business clients.
The Tabak Insurance Agency, a Texas insurance agency, specializes in helping small business owners obtain just the right liability insurance coverage they need to protect their hard work. In the past two years, Tabak has saved clients an average of 20 percent in insurance premiums. Start benefiting from having an insurance agency with a passion for helping entrepreneurs protect their life’s work by contacting Tabak Insurance Agency today.