Everyone knows that starting a new business comes with risk. The company could fail despite your best effort. Workers or even customers could bring a civil lawsuit against the business, which can be expensive even if the lawsuit isn’t successful.
Identifying some of these risks in the early stages of business development can help you plan to avoid them and purchase insurance to protect against the most common risks for your business model.
Product liability or service liability
Do you repair damage to people’s roofs or manufacture a specialized kitchen tool? Mistakes during the manufacturing process could result in a product failing and injuring consumers. Poor planning or attempts to cut corners by your laborers might mean that a service you provide does not meet industry standards.
Even small mistakes during production, testing or servicing a customer’s property could lead to significant liability. When your company’s products or services fail and cause injury or property loss for others, those affected might bring a civil suit against the business.
Workers can cause financial issues for your company in multiple ways. A worker could get hurt while working at your company and try to file a civil lawsuit by blaming you for the accident.
One worker might mistreat other employees, leading to those unhappy workers bringing claims against your company for a hostile work environment or other forms of discrimination. Workers can also make mistakes when performing services or making products that later lead to claims against the company.
There are two kinds of financial risks that stem from having a physical business location. Premises liability refers to the risk that others could get hurt while visiting your facilities. There is also the ongoing expense of maintaining those facilities, which could prove problematic if your company has to shut down indefinitely for reasons outside of your control.
General business liability coverage, product liability coverage, premises liability coverage and even business interruption coverage can all help an entrepreneur protect against these potential sources of financial loss for their company. Learning more about the possible future issues based on your industry and business model will make it easier for you to identify and protect against known business risks.