If your business is structured as a partnership or sole proprietorship, you are liable both professionally and personally for negligence, errors, omissions, malpractice, and other damaging events that affect your business. Ensuring you have enough liability insurance helps protect your business from financial loss and compensates for financial losses if an unforeseen event affects business continuity. Liability insurance also can help you avoid personal financial ruin in the case of a lawsuit, natural disaster, theft, or other catastrophe.

Even if you incorporated your business or run it as a limited liability company (LLC), you can be held personally liable in certain situations, such as:

• Your personal finances are tied to the business via a personal guarantee loan.
• You personally injured someone.
• You took actions that were deemed irresponsible or illegal.
• Your business does not operate as a separate entity.

A safe assumption is that if you run a business, you can be held liable in some situations. Your insurance agent or broker can help you determine how much liability insurance is right for you.