Liability Insurance for Small Businesses

Non-permanency is the ultimate truth of every aspect of our countable life spans. This applies more to our businesses and fortunes. In order to provide a financial safety net to one’s business, it is necessary to insure it against any unprecedented incident. This is where Liability Insurance comes into limelight.

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Liability insurance is a risk-financing solution that protects the insured from the lawsuits and its associative claims. It is designed to offer security against any third party claims or losses.

What is Liability Insurance?

Liability Insurance is a part of General Insurance and provides legal security to the owners of both large and small-scale businesses from the risk of any anti-social activities and damages. It is quite common important for business owners they need it to protect their assets. There are different types of liability insurance. We are listing them down for you to check out:

Various Types of Liability Insurance

  • Employers’ Liability and Workers’ Compensation provide protection to the business from the liabilities caused due to the injuries and death of an employee.
  • Product liability insurance deals with the products manufactured for the market and it covers the legal repercussions of the injuries or deaths due to the use of the products.
  • Indemnity insurance protects the business from the negligence claims due to the damages or mistakes or failure in delivering optimum performance by the professional/business.
  • Director and Officer liability insurance is for those companies that have a board of directors or officers who are to be given additional protection against any official misconduct or mistake.
  • Comprehensive General Liability insurance is applicable in case of large scale or small scale businesses, partnerships or joint ventures, corporations or associations, and upcoming businesses or organizations. It provides insurance against property damage, injuries due to the negligent act of the employees, medical payments, compensatory losses and operational liabilities. The size and the risk related to the business also fall under the coverage of Comprehensive General Liability insurance.

What is the Need for Liability Insurance for Small Business?

  • Liability insurance is important for small business owners in order to provide protection in case of any unfortunate situation.
  • It includes claims related to any injuries sustained by the employees, any damages to the property, legal settlements etc.
  • It helps in damage control without jeopardizing the business despite any sort of damages, injuries or ignorance.

Besides covering injuries or property damage, it also protects the company from copyright infringement.

So before selecting the right provider, one must go through the inclusions of the coverage and compare the claim-risk factors which match the requirements of the business.

Risk Coverage of the Liability Insurance 

  • Physical injuries and property damages are subject to claims in Corporate Insurance Policy.
  • Maligning of reputation claims cover if the reputation of a business gets affected due to a violation of law, any sort of wrong deeds, slander etc.
  • Commercial errors claim against false advertisement or illegal usage of copyrighted material.
  • Medical Cost covers the payment related to bodily injury arising from the accidents occurred during the course of business.
  • Property Damage includes the rented property that gets subjected to destruction due to natural or man-made hazards like fire, lightning, explosions and more.

Cost of Liability Insurance

The cost of liability insurance varies on the basis of the type of business, its market strategy and risks it faces. For instance, high-risk business, like construction companies, pay high rates of premium while low-risk business like consultancy firms are charged with low rates. Premium also gets lowered as the experience of the firm increases. It is also affected by the location, size and the present conditions of the company.

Importance of the Liability Insurance  

It offers legal and financial protection to the business and its owners. It looks after the legal charges while defending the company.

  • It helps in carrying on your business deals without worrying about any unforeseen situation.
  • It also provides workers with compensation if they are subjected to any injury at work or to their families in case of their death.

Insurance is important for any kind of business but liability insurance proves to be more important as it secures the business against catastrophic incidents.

What is Excluded from the Liability Insurance? 

Many items are not covered under this policy. These items include-

  • Claims made due to different kinds of pollutants released due to your business and any damage to the ecosystem arising due to the wastes disposed of by your company in forms of fumes or chemicals drained into the water bodies.
  • Losses caused due to any certified harmful products of your company are a subject of exclusion.
  • Damages caused on purpose are also excluded from the risk coverage of liability insurance policy.
  • Any personal liability shall not be covered

There is no denying that both large scale and small scale businesses must take into account all the associative risks of their business and opt for a suitable liability insurance - a sole tool to carry on your businesses peacefully without any legal and financial hassle.

Written By: PolicyBazaar - Updated: 18 August 2022