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Insurance

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Contributing Authors

	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
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	Joe Kennedy Author of The Small Business Owner's Manual
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	Tom Severance Author of Business Start-Up Guide
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	Steven D. Strauss Author of The Small Business Bible
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General Liability

If your small business rents its premises, just about all lease agreements require that the lessee (that’s you) pay for General Liability Insurance. Here is typical language found in a lease:

Lessee shall, at Lessee’s expense, obtain and keep in force during the term of this lease a policy of comprehensive public liability and property insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. The limit of said insurance shall not, however, limit the liability of the Lessee hereunder. Insurance provided hereunder shall be in companies rated A+, AAA or better in “Best’s Insurance Guide.” Such insurance shall be a combined single limit in an amount not less than $1,000,000.

In this situation, the landlord requires $1,00,000 in coverage per incident from a quality company that is sure to pay if a problem occurs. Note that the small business remains liable for losses not paid by the insurance company.

In most cases, the lessor (landlord) asks to be named as “additional insured,” so that if something terrible happens, the insurance company may pay the landlord directly. Insurance companies are then happy to provide a certificate of insurance to the additional party to affirm this understanding.

Examples of terrible things might include a forklift that accidentally punches a hole through a wall and into an adjacent business, or an electrical problem that burns down your office and the entire building at night.

General Liability Insurance is often purchased in minimal amounts by small business owners, but then results in inadequate payouts when problems occur. For just a few dollars more, problems resulting in bankruptcy can be avoided, so perhaps this is not the best place to skimp when purchasing insurance coverages.