As a small web design business grows, owners need to evaluate the need for business insurance. According to the Small Business Administration, there are four main areas of business insurance: general liability insurance, product liability insurance, professional liability insurance, and commercial property insurance.
This article will help small web design businesses evaluate their insurance needs and pick the coverage that is right for their needs – also, if you’re in Canada, Kanetix has an awesome comparison service you can use online for free.
General Liability Insurance
Each year, hundreds of businesses are sued for accidents that occur on company property. If a pedestrian slips and falls on the sidewalk outside a design company’s office, that business could be liable for the pedestrian’s injuries. If an angry customer files a baseless lawsuit against a company, that company could rack up tens of thousands of dollars in legal bills trying to defend against the claim.
These liabilities and legal defense costs can wipe out a small company, even if the business ultimately defeats a lawsuit. Almost every business, even a small design firm, should have general liability insurance to protect against liability lawsuits.
Thankfully, general liability insurance is widely available and affordable. Purchasing coverage can give business owners the peace of mind that they will be protected from fraudulent lawsuits and financial liability for damages.
Product Liability Insurance
Some businesses need protection against lawsuits if their products cause bodily injury. Most web design companies will not need this insurance, since websites or web applications rarely lead to physical injury. Business owners should consult with an attorney to see if their products have any risk of physical injury.
A website with flashing lights could provide grounds for a lawsuit to someone suffering from epilepsy. A website that gives traffic directions could be liable if their product leads someone to have an accident. These incidents are hypothetical and improbable, but a professional attorney can give legal advice about product liability and whether a web design company should seek product liability insurance coverage.
Professional Liability Insurance
Many businesses will take out professional liability insurance in addition to their general liability policy, though for web design businesses (who rarely interact directly with clients as often as other businesses) professional liability insurance can be even more important than general liability coverage.
This coverage protects businesses against lawsuits stemming from errors in their work or poor design. Some business owners are surprised when clients file professional liability lawsuits against them, sometimes even years after the work has been completed.
The cost of professional liability coverage will depend on the size of the business and the products sold. A large business selling a low-liability product—like web design services—may have lower premiums than a small business selling a high-liability product like seat belts.
Commercial Property Insurance
This coverage is essential for businesses that own their office space. It protects against damage to commercial property from fires, floods, extreme weather, burglary, and vandalism. Some policies may even compensate for lost revenue while the business is searching for a new building, helping companies continue to pay employees and contractors.
Businesses that rent office space will not need this coverage. The landlord usually covers damage to property, and any damage caused by the business—like an accidental fire—is frequently covered by general liability insurance.