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Liability Mitigation: Insurance Options for Small Businesses

 

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All small businesses confront some level of risk in the course of operation. The impact of those risks (such as accidents causing bodily injury or unexpected lawsuits brought by third parties), can be substantial, and could result in large unforseen costs. Fortunately, small businesses are able to mitigate such risks in a variety of ways through documents like waivers, disclosures, and independent contractor agreements. However, one of the most powerful ways a small business can minimize the negative impact of unexpected events is by having business insurance.[1]

Though a powerful mechanism for risk mitigation, navigating insurance coverage and options can be confusing and overwhelming. How do you know what insurance will best protect you and your business? Before diving into insurance options, and reviewing the following chart, begin by considering what risks your business might face.[2] With those risks in mind (and the advice of a licensed insurance broker), small business owners are equipped with the tools to purchase the right policy—or combination of policies—to mitigate the most pressing risks.[3]

This blog post aims to make the task of locating relevant insurance coverage more manageable by providing a high-level overview of business insurance options available in Michigan.[4] The following chart is divided into three categories. First, Liability Coverage options. These policies provide coverage that protects you against claims by third parties (not yourself or someone who works for you (e.g., an employee or independent contractor), rather ‘third party’ refers to anyone outside of your business). Second, Property Coverage options. These policies cover your business property, and coverage includes replacement/repair for damage to your business property. Third, Bundle Options. These policies are examples of common ways that insurance providers package multiple forms of coverage into one policy for small business owners.[5]

The first column identifies the type of policy available. The second column describes the general form of coverage provided by said policy (emphasis on general because there can be important differences in coverage between different providers). Finally, column three provides an example of how the coverage that policy provides applies to specific situations.


The descriptions of policies included here are by no means exhaustive, and there are additional aspects to each. In many instances, coverage may be even more expansive than is indicated in these brief overviews. If you choose to purchase insurance, we highly recommend reaching out to an insurance broker(s) and shopping around for the right policy. Upon identifying specific options, a broker will be able to provide concrete answers regarding when and how the coverage applies to risks faced by your business.

  By Ally Milam


[4] Small business insurance providers are abundant in the state of Michigan. The information in the following chart is drawn from a variety of neutral sources which discuss small business insurance (such as the Small Business Association) as well as directly from various insurance providers (such as Hiscox, The Hartford, Thimble, Progressive, etc.).

[5] Please note that the Clinic has no direct experience with these specific insurance policies or providers and the Clinic does not endorse any policy, plan, or provider mentioned in this memo.






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