If you own a small business in the Golden State, this information will help you understand California Commercial Liability insurance and protect your business and your personal assets from legal claims and settlements that can spell financial ruin. Having sufficient commercial liability coverage is an important part of any small business plan.
A small business is defined as any company with fewer than 500 employees. Of California’s 3.4 million small businesses, about 97.4% have 1 to 99 employees and employ 37% of all private-sector paid workers in the state. Another 2.6 million businesses are one-person operations with no employees. Source: SBA California Economic Profile, 2006.
About Commercial Liability Insurance for CA Businesses
Commercial liability insurance (also called business liability insurance and commercial general liability insurance) protects your California business from financial loss resulting from claims of injury or damage cause to others by you or your employees. A policy typically covers:
Bodily Injury – physical damavge to a person other than an employee at your place of business and injuries caused by you or an employee at a client’s home or work place.
Personal Injury – libel, slander, copyright infringement, invasion of property or privacy, wrongful eviction, false arrest and similar acts that cause damage to a person’s reputation or rights.
Advertising Injury – losses caused by your advertising
Legal Defense and Judgments – costs to defend against real and frivolous suits and judgments up to the limit of your coverage. Note this generally does not include punitive damages for negligence or willful misconduct.
California Minimum Business Insurance Requirements
Commercial Liability Insurance is not mandatory for businesses operating in California. However, California puts no cap on liability law suit rewards, and the state courts have a reputation for awarding large liability judgments. If you own property or other valuable assets you would be wise to invest in sufficient commercial liability coverage to limit your risk exposure.
How Much Commercial Liability Insurance Should You Carry?
Each situation is unique, but as a general guideline, the type of business you operate or products you manufacture should determine how much California commercial liability insurance you need. A good rule of thumb for most small businesses is between $500,000 and $1 million. However, if yours is a high-risk business such as the building trades or have a high volume of interaction with the public such as retail business, you should consider increasing your coverage. Note that if you operate out of your home, your homeowner’s or renter’s insurance has limited coverage for business liability and loss.
How Are Premium Costs Assessed?
California commercial liability insurance premiums are based on a number of factors including the types of service or products you provide, the number of people you employ, how long you’ve been in business, you’re your claims history. Coverage is typically capped at a specific dollar amount for your policy period.
Other Insurance to Consider for Your California Small Business
California requires that you carry workers compensation insurance if you have employees.
California requires that you provide disability insurance to cover partial wage replacement coverage for eligible employee for non-work related sickness or injury.
California requires that all drivers carry minimum automobile insurance. If you use your car or truck for business, it is recommended that you purchase a commercial vehicle policy.
California Department of Insurance
This agency is responsible for regulating vehicle insurance policies sold in the California. For more information, visit their website at www.insurance.ca.gov.
California Small Business Administration
The SBA is an independent agency of the federal government created to aid, counsel, assist and protect the interests of small business concerns and maintains California district offices in Fresno, Los Angeles, Sacramento, Santa Ana, San Diego and San Francisco. Get links to district offices at www.dmv.ca.gov.
National Association of Insurance Commissioners (NAIC)
This is an organization of insurance regulators from the 50 states, District of Columbia and the five U.S. territories. NAIC provides a forum for the development of uniform policies when appropriate. It also offers an online form for filing complaints, reporting suspected insurance fraud and downloading key financial information about insurance carriers at http://www.naic.org/cis.
Insurance Information Institute (III)
This organization’s mission is to improve public understanding of insurance – what it is and how it works. Visit III at http://www.iii.org/.