When you start a business, getting liability insurance rarely ranks as a high priority action item. As the years pass, successfully building a business without this type of insurance can lead you to believe that "getting by" works just fine. Until, of course, you find your company is the target of a lawsuit.

Broadly speaking, liability insurance protects your business from lawsuits where the person or business filing the lawsuit claims that your business has done, or has failed to do, something that has had a negative impact on the litigant. Liability insurance covers the legal fees associated with defending the lawsuit and damages that may result.

Liability insurance comes in a variety of sizes and flavors. The most common way to obtain coverage is via a business owners (BOP) policy that combines property and liability coverage in one package. Getting a BOP can be the most cost-effective way to obtain liability coverage for your small business.

You can also sign up for a standalone comprehensive general liability (CGL) insurance policy. But do not let the name fool you - "comprehensive" does not mean you are covered for all liabilities. Instead, you will need specialized types of insurance to supplement this coverage. Such insurance that cover potential holes in the general coverage include business interruption insurance, errors and omissions insurance, and product liability insurance.

As you might imagine, the key to successfully obtaining liability insurance is to get coverage for the aspects of your business where a lawsuit is likely to arise. Then you need to find coverage that will cover this potential litigation. To manage your costs, create a prioritized lists of risks that your company faces and limit coverage to those risks that are most likely to occur and/or will result in the most costly litigation.

There are a number of additional strategies you can take to manage your liability costs. Try increasing your deductible to as high an amount as you can comfortably pay. It can also be more cost-effective to utilize common insurance packages that have a broad base of subscribers to that type of policy.

Liability insurance is less costly than you think. Many small businesses will no doubt be surprised to find that premiums range in the hundreds to low thousands of dollars per year. An insurance broker should be able to provide additional strategies to manage your costs.

Beyond pricing, pay attention to the policy details. One important detail you need to understand is how your policy determines whether it will handle a given claim. Occurrence-made insurance covers claims filed during the policy year. On the other hand, claims-made insurance provides coverage based on when the alleged negligence occurred. If you switch between types, you should make sure that you have the appropriate coverage.

While it may seem anathema for a risk-taking business owner to take out liability insurance, not having adequate coverage can be a downright foolish move.