Generally speaking, if you're not at the controls of a vehicle, insurance is not a legal requirement. When driving a car, you are required to carry auto liability insurance in order to cover any injuries or damages for which you may be held responsible in an accident. In most other scenarios, you buy insurance not because it is legally mandated, but because you need to look after your own interests.
That said, while general liability insurance might not always be a legal requirement for your business, it may be mandated by other means:
- In business matters, not having general liability coverage may mean that certain contractors won't work with you, certain companies won't do business with you, and certain investors won't back you.
- Landlords renting out business or event properties may require that their tenants carry general liability insurance.
- Certain professional guilds and unions may require that you invest in general liability insurance.
While there may be official mandates on insurance within your industry, they're not typically going to be legally binding until you've signed a contract. You may be required to carry insurance if you want to work with a certain distributor or rent a certain location. But beyond concerns like these, you're essentially free to handle the risks of owning a business however you like.
It's not advisable to run a business without general liability insurance. It may limit your options, or it may hobble your business in the long run. But it's not illegal to run a business without general liability coverage.
If you have the money to cover all likely damages out of pocket, you might find it appealing to go without insurance. But before you make your decision, consider what those costs will be:
- The average slip and fall claim costs around $30,000 to $40,000
- The average customer injury claim costs around $35,000
- Reputation harm claims can cost an average of $50,000
Maybe a multinational corporation can easily cover all that out-of-pocket. But the average small business might not. Remember that you're going to be covering your own legal fees as well. Just having a lawyer look at the case is likely to wind up costing you more than your annual premiums would have been.
We work our whole lives to build a successful business. Yet, it doesn't take much to bring financial ruin to your doorstep. Maybe you're not required to carry general liability insurance. But that doesn't mean you don't need it.
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