Avoid costs with business liability insurance

Private liability insurance does not cover damage you cause while working in your own business. For this, you can take out business liability insurance (also called liability insurance for companies, abbreviated to AVB in Dutch).

Business liability insurance coverage

The AVB covers

• damage to things (material damage). For example, someone's laptop breaks because you spill your coffee on it. 
• damage to persons (personal injury). Someone breaks a wrist because they slip on a loose carpet in your office. 
• damage indirectly caused by an accident (financial consequential damage). For example, someone can no longer work and therefore loses income. 
• damage an employee causes to company assets. An employee drops tools and these get broken.

Barbara Stoopman of Nouveau Consultancy advises entrepreneurs on how to limit financial risks. She believes business liability insurance is the basis for every entrepreneur. Sometimes additional insurance is needed, such as professional indemnity insurance. ‘A high claim for damages can have major financial consequences for you and your business,’ she says.

Real-life examples

Anything can go wrong in your business. In the examples below, business liability insurance covers the damage:

• Karin receives clients in her coaching practice. A loose cord causes a client to fall. The latter breaks his hip and is unable to work fully for weeks. There is personal injury and financial damage.

Consequence: the client holds Karin liable. Karin must compensate the client's medical expenses and loss of income.

• Abdul is a carpenter and drops his drill on a client's wooden floor. Part of the floor has to be replaced. In this case, there is material damage.

Consequence: the customer holds Abdul liable and he has to pay for the repair.

• James imports hair dye under his own brand, but the composition of the dye is flawed. Customers suffer an allergic reaction. There is personal injury.

Consequence: customers hold James liable. James has to pay his customers' medical expenses.

Video: On top of business risks

Vinsent Hooimeijer, account manager at Interpolis, explains how to limit your liability as a self-employed professional without staff.

Controlling business risks

Costs of business liability insurance

KVK advisers often hear from entrepreneurs that they find an AVB expensive. Such an insurance is an expense, but it can end up saving high costs. You may be able to pay for damage to a laptop yourself. But a claim for personal injury can add up considerably.

What determines the premium?

How high your business liability insurance premium is depends on:

• Your profession.
• The turnover of your business.
• Whether and how many staff you employ.

With these data, the insurance company estimates how likely it is that you will cause damage and for what amount. The higher your risks, the higher your premium. A plumber or carpenter pays around 500 euros per year on average. Are you a coach or consultant? Then the premium is about 150 euros a year.

You take out an AVB from an insurance company, independent insurance adviser, bank or sector organisation. You can easily calculate your premium online. Or you use a comparison website.

‘You can insure for everything, but don't insure yourself bankrupt,’ advises Stoopman. ‘Get good advice. An adviser will look at your risks and how you can limit them in other ways: with good contracts, general terms and conditions, the whole picture.’

Premium deductible

The premium you pay for business insurance is deductible when you file your income tax or profit tax return. Include the premium cost in the calculation of your hourly rate as well.

Not compulsory, but sensible

You are not legally obliged to take out an AVB. But in practice, it is sometimes necessary, according to Stoopman. ‘A client may demand that you have business liability insurance. You demonstrate this by showing your policy. No liability insurance? That often means no assignment.’

Do you work together with other self-employed people on an assignment and do you send the invoice? Check whether the self-employed workers you hire have their corporate liability in order. Otherwise, the client may hold you liable in case of damage because you are ultimately responsible.

SBI code and insurance

The KVK Business Register states what activities you perform and what your SBI code is. Make sure your SBI code matches what you do as a self-employed professional without staff. Insurers use your SBI code to calculate your premium. If you incur damage that does not match the activities you carry out according to your SBI code, the insurance will not cover it.

Example: you have registered an online shop with KVK, but you also sometimes install a kitchen. When placing a kitchen, you cause damage. This is not covered because installing kitchens is not your main activity.

Do you often carry out different activities? Report this to KVK and to your insurer. KVK will then also register your other activities. The insurer can adjust your premium accordingly. This way, you can be sure that damage is covered for all your activities.