Hiring new employees is one of the easiest (and fastest) ways to instantly increase the value of your company. However, those new hires also add certain risks and liabilities that simply cannot be ignored.
If your business is at the point where you’re considering hiring additional employees, you need to be thinking about what potential liabilities those new hires will be bringing with them.
Employees are obviously the lifeblood of any company. Without them, work wouldn’t get done and business wouldn’t be able to increase. That being said, there’s always some bad that comes along with the good. Employees aren’t perfect. Mistakes will happen. Accidents will occur. Injuries are possible.
The best way to mitigate risk is to have the appropriate types of insurance. Most businesses need more than one insurance policy to adequately cover them.
Below we cover four of the most common (and necessary) forms of insurance (no matter what industry you operate in).
Professional Liability Insurance
Professional liability insurance is used for businesses that offer consultation services (or related types of services) to other businesses/clients. This type of insurance protects businesses from lawsuits or other legal actions that clients/customers may file against them.
Another common term this type of policy is referred to as is called “errors and omissions insurance.” Professional liability insurance and errors/omissions insurance are interchangeable terms (they offer the exact same type of coverage’s).
Contrary to popular belief, there are actually two types of professional liability insurance policies. The two policy types are what’s known as “occurrence” and “claims-made.” The most common type of professional liability policy type is “claims-made.”
Policies that are “claims-made” require the business to actually have the policy in effect before/during the lawsuit-causing event. Occurrence policies, on the other hand, are designed to provide coverage at any time during the actual period of coverage (even if the lawsuit was filed after the policy officially ended).
Contrary to this insurance type’s name, it doesn’t offer protection against “general” liabilities. What it does do though, is protect businesses from common types of workplace accidents and injuries. General liability policies also protect a business against legal actions that stem from third-party property damage.
General liability insurance typically covers legal costs (up to a certain point). Exactly how much of the legal costs are covered depends entirely on the specific policy that a company purchases. Some policies may have coverage limits as high as a few million, while others may only go into the thousands.
You’ve most likely already heard of workers’ compensation. Maybe you even know someone who collects workers’ compensation payments. This type of insurance can protect your business from paying employees lost wages (due to workplace injuries).
This insurance type is very popular across numerous industries, for the simple fact that most workers’ compensation agreements feature caveats that essentially bar employees from filing a lawsuit against their employers. In most states across the country, it’s legally required for businesses to have a workers’ compensation insurance policy.
If you’re in one of the few states that doesn’t require workers’ compensation (and are hesitant about purchasing it), just remember that this relatively inexpensive insurance policy can save you thousands down the line. If an employee gets injured and you don’t have workers’ compensation, you could potentially owe them thousands in unpaid wages and/or legal fees.
EPLI Policies for Protection Against Employee-Employer Lawsuits
EPLI (Employment Practices Liability Insurance) is a type of business insurance that protects companies from their employees filing lawsuits against them in regards to employee-employer relationships. Issues such as sexual harassment and discrimination fall into this category.
You might be a small business who treats their employees very fair, or you might be a large business with no way to know how all of your employees perceive their treatment. Either way, it’s generally recommended for a business to open this type of policy. Many times, you can set up an umbrella policy with your insurance company to basically have multiple policies under one “umbrella” (i.e. main) policy.
It really doesn’t matter how large your business is, how many employees you have, or what industry you belong to. You should have at least one form of business insurance. The insurance types listed above are a good primer on the subject (but it’s by no means an exhaustive list). Remember to shop around at different companies, and compare quotes before opening a policy.
Always compare coverage amounts, and never purchase a policy solely based on its price.